Introduction
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, in Anisha Sachdeva v. Assistant Director of Income Tax (ITA No. 5288/Del/2025), delivered a significant ruling on the procedural requirements for claiming Foreign Tax Credit (FTC) under the Income Tax Act, 1961. The core issue was whether the belated filing of Form 67 under Rule 128 of the Income Tax Rules, 1962, is fatal to the claim of FTC under sections 90/91 of the Act. The Tribunal held that the requirement to file Form 67 within the due date specified under section 139(1) is directory and not mandatory, thereby allowing the assessee’s appeal and directing the Assessing Officer (AO) to grant the FTC after due verification. This commentary dissects the factual backdrop, rival submissions, judicial reasoning, and the wider implications of this ruling for taxpayers claiming double taxation relief.
### Facts of the Case
The assessee, Anisha Sachdeva, an architect by profession, provided interior services in Nepal during the Assessment Year (AY) 2019-20. She filed her return of income declaring a total income of ₹15,42,500 and claimed a Foreign Tax Credit (FTC) of ₹2,86,260 under section 90/91 of the Act. The Nepalese authorities had deducted TDS of ₹5,40,513 on payments of ₹36,30,211. However, the assessee inadvertently failed to file Form 67—the prescribed statement for claiming FTC—before the due date for filing the return under section 139(1) (extended to 31.08.2019 for AY 2019-20). She realized the omission later and filed Form 67 on 21.02.2022.
The Central Processing Centre (CPC), Bengaluru, processed the return under section 143(1) and disallowed the FTC claim, raising a demand of ₹3,50,030. A rectification petition under section 154 was filed, but the CPC passed a rectification order on 03.04.2021, reiterating the denial of FTC and increasing the demand to ₹3,52,822. The assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], Chennai, who upheld the CPC’s action, relying on Rule 128(8)/(9) which uses the word “shall” and citing the Supreme Court judgment in Principal Commissioner of Income-tax v. Wipro Ltd. (2022) 446 ITR 1 (SC) that pertained to section 10B(8) declarations. Aggrieved, the assessee approached the ITAT.
### Reasoning of the Tribunal
The ITAT, presided over by Accountant Member Shri Brajesh Kumar Singh, allowed the appeal after a thorough analysis of the legal contentions. The reasoning can be segmented into three key pillars:
1. Procedural vs. Substantive Requirement: The Tribunal observed that the claim for FTC is a substantive right granted by section 90/91 of the Act and the applicable Double Taxation Avoidance Agreement (DTAA) between India and Nepal. Article 23(2)(i)(a) of the India-Nepal DTAA mandates that India shall allow a deduction for tax paid in Nepal. Rule 128, which prescribes Form 67, is a procedural mechanism to facilitate the claim. The Tribunal noted that the Act does not impose any prohibition on claiming relief from double taxation merely because Form 67 was not filed within the prescribed time. Accordingly, the directory nature of Rule 128 was underscored.
2. Distinguishing the Supreme Court’s Ruling in Wipro Ltd.: The CIT(A) had heavily relied on the Supreme Court’s decision in Principal Commissioner of Income-tax v. Wipro Ltd. (supra). The Tribunal, however, distinguished this precedent, holding that the Wipro case dealt with section 10B(8) of the Act, which required a declaration to be furnished before the due date for claiming a tax holiday benefit. That condition was treated as mandatory by the Supreme Court because it involved a substantive waiver of tax liability and the declaration had to be filed with the Assessing Officer before the due date for original return. In contrast, FTC claims under section 90/91 and Rule 128 are not akin to a conditional tax holiday; they merely require a procedural form to be furnished for verification of foreign taxes paid. Thus, the reasoning of Wipro was not applicable to the facts of the present case.
3. Precedential Support from Coordinate Benches and the Madras High Court: The Tribunal followed a consistent line of decisions from the Delhi ITAT and other benches. Notably, in Anubhav Singhal v. ITO (ITA No. 1640/Del/2025), the Tribunal had held that filing Form 67 is directory. The same view was adopted in Neha Kapoor v. ITO (ITA 135/Del/2023) and Smt. Sonali Verma v. Income Tax Officer (ITA No. 778/Hyd/2025). The Tribunal also placed reliance on the judgment of the Madras High Court in Duraiswamy Kumaraswamy v. PCIT (2023) 156 taxmann.com 445 (Madras), which explicitly observed that the requirement of filing Form 67 under Rule 128 is directory in nature. The Tribunal emphasized that the department had itself accepted the belated filing of Form 67 for the assessee’s own case for AY 2020-21, as evidenced by the paper book, which indicated a consistent administrative practice.
The Tribunal concluded that the assessee had already filed Form 67 on 21.02.2022, albeit belatedly. Since the Revenue did not dispute the actual payment of foreign taxes, the delay in filing Form 67 could not be a ground to deny the substantive right to FTC. The Assessing Officer was directed to allow the FTC of ₹2,86,260 after due verification of the foreign tax payment and TDS certificates.
### Conclusion
The ITAT’s decision in Anisha Sachdeva reaffirms the principle that procedural irregularities should not override substantive rights, especially when the Revenue is not prejudiced. By categorizing the requirement of filing Form 67 as directory, the Tribunal has provided much-needed clarity to taxpayers who inadvertently miss the deadline for claiming Foreign Tax Credit. The distinction drawn from the Supreme Court’s Wipro judgment is legally sound, as section 10B(8) involves a substantive condition, whereas FTC involves a procedural verification. This ruling will serve as a persuasive precedent for other ITAT benches and may encourage the CBDT to issue a circular clarifying the directory nature of Rule 128.
Taxpayers and practitioners should note that while Form 67 can be filed belatedly, it is prudent to file it as early as possible to avoid litigation. The Assessing Officer must still verify the genuineness of the foreign tax credit claim before granting relief.