ITAT Mumbai Grants Relief To Sachin Khedekar, Holds Delay In Filing Form 67 Not Fatal For FTC Claim

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 10 April allowed an appeal filed by actor Sachin Shrikant Khedekar and held that delay in filing Form No. 67 is a procedural lapse and cannot justify denial of foreign tax credit under Section 90 of the Income Tax Act, 1961.

A Bench of Judicial Member Sandeep Singh Karhail and Accountant Member Bijayananda Pruseth held:

“.....mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India.....”

Khedekar filed his return for Assessment Year 2018–19 under Section 139(1), declaring total income of Rs. 80.48 lakh, including foreign income of Rs. 26.84 lakh on which he paid taxes of Rs. 5.36 lakh abroad. He claimed foreign tax credit under Section 90 in his return.

While processing the return under Section 143(1), the Centralised Processing Centre (CPC) denied the credit on the ground that he had not filed Form No. 67 within the prescribed time under Rule 128(9) of the Income Tax Rules, 1962.

He then filed a rectification application under Section 154 along with Form No. 67 and supporting documents. However, the authorities rejected the application, and the CIT(A) upheld the denial on the ground that he had not filed Form No. 67 within the prescribed timeline.

Before the Tribunal, Khedekar argued that he filed Form No. 67 during the rectification proceedings and that Rule 128 is procedural and cannot override the substantive right under Section 90. He contended that the timeline under Rule 128(9) is directory and not mandatory.

The Revenue argued that Rule 128(9) imposes a mandatory requirement, and failure to comply with the timeline disentitles the taxpayer from claiming foreign tax credit.

The Tribunal noted that the taxpayer had filed Form No. 67 during the rectification proceedings and furnished proof of taxes paid abroad. It also observed that Rule 128(9), as applicable to the relevant assessment year, prescribed a timeline but did not specify any consequence for non-compliance.

The Bench held that delay in filing Form No. 67 is a procedural defect that can be condoned and cannot defeat a substantive claim for foreign tax credit. It also noted the amendment to Rule 128(9) with effect from 1 April 2022, extends the timeline for filing Form No. 67 till the end of the assessment year. It held:

“with effect from 01/04/2022, the time period for furnishing a statement in Form No. 67 has been extended till the end of the assessment year in which the corresponding income has been offered/assessed to tax and the return of such assessment year has been furnished within the time specified under 139(1) or 139(4) of the Act.”

The Tribunal further added:

“.....Since in the present case, the claim of the assessee was denied on this technical aspect without going into the merits, we deem it appropriate to direct the jurisdictional AO to decide the claim of the foreign tax credit on merits, after accepting the Form No.67 and other related documents filed by the assessee....”

Accordingly, the ITAT directed the Assessing Officer to examine Khedekar's claim for foreign tax credit on merits after considering Form No. 67 and supporting documents.

For Appellant: Advocate, Neelam Jadhav

For Respondent: Senior Advocate, Anurag Tripathi