₹1.79 Lakh US Tax Credit Denied Over Late Form 67 Filing: Bengaluru ITAT Rules in Taxpayer’s Favour

Bengaluru ITAT Rules on Foreign Tax Credit Denied Over Late Form 67

The Income Tax Appellate Tribunal (ITAT), Bengaluru, has provided relief to an Indian taxpayer whose claim for foreign tax credit (FTC) was rejected because Form 67 was filed after the prescribed deadline.

The case involved an Indian taxpayer who earned income in the United States, paid tax there and also reported the income in India. He sought credit for the foreign tax paid to prevent the same income from being taxed twice.

The tribunal held that late submission of Form 67 should not, by itself, be a ground for rejecting a foreign tax credit claim, provided the taxpayer satisfies the substantive requirements and the foreign tax payment can be verified. The matter has been remanded to the Assessing Officer for examination on its merits.

How Much US Tax Did the Taxpayer Pay?

According to The Economic Times, the taxpayer, identified as Mr Shekhar, earned approximately ₹8.98 lakh from the United States during assessment year 2017–18.

He paid around ₹1.79 lakh in US tax on the foreign income and also declared the corresponding income in his Indian income tax return.

He claimed a foreign tax credit of ₹1,64,427 in India, which was lower than the amount of tax reportedly paid in the US. The claim was made under Section 90 of the Income-tax Act, 1961, read with the applicable India–US Double Taxation Avoidance Agreement (DTAA).

Why Was the Foreign Tax Credit Rejected?

The Centralised Processing Centre (CPC), Bengaluru, processed the taxpayer’s return and denied the foreign tax credit because Form 67 had not been filed within the prescribed time.

The taxpayer subsequently filed a revised return, but the claim was rejected again. He then approached the appellate authorities, where his appeal was dismissed.

He eventually appealed to the ITAT Bengaluru, arguing that the delay in filing the prescribed form should not automatically deprive him of credit for taxes actually paid abroad.

The key question before the tribunal was whether a procedural delay could, by itself, override the taxpayer’s substantive entitlement to relief from double taxation.

What Did the ITAT Bengaluru Decide?

The tribunal ruled in the taxpayer’s favour on the legal issue concerning delayed filing.

It observed that the taxpayer had reported the foreign income in India and provided documents relating to the US tax paid. The records included Form 67 and the US Form W-2, which supported the foreign income and tax details.

The tribunal relied on earlier judicial decisions, including the case of Sonakshi Sinha v. CIT, while considering whether the filing deadline under Rule 128(9) should be treated as an absolute condition for receiving foreign tax credit.

The tribunal concluded that the delay in submitting Form 67 should not, by itself, extinguish the taxpayer’s claim when the underlying income and foreign tax payment can be examined.

Will the Taxpayer Automatically Receive ₹1.64 Lakh?

No. The tribunal did not automatically grant the full foreign tax credit of ₹1,64,427.

Instead, it restored the matter to the jurisdictional Assessing Officer for verification and a fresh decision on the merits of the claim.

The Assessing Officer must examine the Form 67 and supporting documents, verify the tax paid in the US and determine the amount of foreign tax credit that is legally admissible. The taxpayer must also be given a reasonable opportunity to present his case.

The appeal was therefore allowed for statistical purposes. This means the taxpayer received relief from the earlier rejection on procedural grounds, but the final amount of credit remains subject to verification.

What Is Form 67 and Why Is It Important?

Form 67 is used by eligible Indian resident taxpayers to provide details of foreign income and taxes paid outside India when claiming foreign tax credit.

The credit is intended to reduce double taxation when income is taxable in India and tax has also been paid on that income in another country.

The Income Tax Department’s guidance explains that taxpayers claiming foreign tax credit must submit the prescribed particulars and supporting evidence within the applicable timelines. Documents may include details of the foreign income, tax deducted or paid abroad, and evidence from the foreign tax authority or payer.

Why Is Foreign Tax Credit Important?

An Indian tax resident may earn income from sources in India and abroad. Depending on the applicable tax laws and treaty provisions, the foreign income may also be taxable in India.

Without an eligible foreign tax credit, the taxpayer could face tax liabilities in both countries on the same income.

The credit is not necessarily equal to the entire amount paid overseas. It is generally subject to the applicable domestic law, the relevant tax treaty and limits on the amount of credit available.

In this case, the taxpayer sought credit for ₹1,64,427 against approximately ₹1.79 lakh in US tax. The tribunal’s decision means that the claim should be examined on its merits rather than rejected solely because Form 67 was filed late.

What Are the Form 67 Filing Rules?

The filing deadline depends on the relevant assessment year and the rules applicable to that period.

For the assessment year involved in this case, the applicable version of Rule 128(9) prescribed a deadline linked to the due date for filing the income tax return under Section 139(1). The taxpayer filed Form 67 after that deadline.

The broader legal issue was whether missing the deadline necessarily meant losing the foreign tax credit. The tribunal held that the delay alone was not sufficient to defeat the claim, provided the substantive conditions for the credit were met.

For taxpayers filing under the current framework, it is important to check the rules and forms applicable to the relevant tax year. The Income Tax Department’s official guidance should be consulted before relying on any deadline, particularly where tax law or prescribed forms have changed.

What Should Taxpayers Do If They Paid Tax Abroad?

Taxpayers who earn foreign income and want to claim credit in India should take the following steps:

1. Declare the foreign income correctly: Report income in the appropriate section of the Indian income tax return, as required.

2. Keep evidence of foreign tax paid: Preserve foreign tax returns, withholding statements, tax certificates and other supporting records.

3. Submit Form 67 within the applicable deadline: Do not assume that a tribunal decision allowing a late filing will automatically apply to every case.

4. Check the eligible credit amount: The amount claimed must comply with Indian tax law and the relevant DTAA.

5. Respond to tax notices: If the credit is denied, review the reason and consider the appropriate rectification or appeal procedure.

6. Seek professional advice where needed: Cross-border income, tax residency and treaty provisions can make foreign tax credit claims complicated.

The Income Tax Department provides online filing facilities and guidance for Form 67 through its official e-filing portal.

Does This Ruling Mean Late Form 67 Filing Is Always Accepted?

No. The ruling should not be interpreted as a blanket exemption from the prescribed filing deadlines.

The tribunal’s decision concerns the circumstances of this particular case and the legal consequences of delayed filing under the rules applicable to the relevant assessment year.

Taxpayers must still satisfy the substantive requirements for foreign tax credit, establish that the foreign tax was paid or deducted, and provide the required evidence. The Assessing Officer may verify the claim and determine the amount that is admissible under the applicable law and treaty.

Filing Form 67 on time remains the safer approach to reduce the risk of processing disputes and delays.

Key Takeaways

• The taxpayer earned approximately ₹8.98 lakh in the US and paid around ₹1.79 lakh in US tax.

• He claimed a foreign tax credit of ₹1,64,427 in India.

• The claim was rejected because Form 67 was filed late.

• The ITAT Bengaluru held that delayed filing should not, by itself, defeat an otherwise legitimate foreign tax credit claim.

• The tribunal did not automatically grant the full credit.

• The case was sent back to the Assessing Officer to verify the documents and decide the claim on its merits.

• Form 67 is an important document for eligible taxpayers seeking credit for taxes paid abroad.

• Taxpayers should follow the applicable filing deadlines and retain supporting evidence.

Bottom Line

The ITAT Bengaluru ruling offers relief to taxpayers whose foreign tax credit claims have been rejected solely because Form 67 was filed late. It reinforces the distinction between a procedural delay and the underlying entitlement to relief from double taxation.

However, the ruling does not guarantee that every late-filed claim will be accepted. In this case, the Assessing Officer must still verify the taxpayer’s US tax payment, the corresponding income declared in India and the amount of credit legally available.

Disclaimer: This article is for general information only and does not constitute tax or legal advice. Foreign tax credit eligibility depends on the facts of each case, the applicable tax law and the relevant double taxation agreement. Taxpayers should consult a qualified tax professional for advice on their circumstances.