TaxTMI 
TaxTMI 
2026 (7) TMI 959
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.... the United Kingdom. In the return of income the assessee has claimed foreign tax credit u/s 90 of the Act. However, form no.67 which contains the details of foreign tax credit and is required to be filed by the assessee online, has been filed belatedly on 20.05.2025. We note that prior to the filing of form 67, the Centralized Processing Centre (in short CPC) processed the return on 06.05.2025 denying alleged foreign tax credit. Aggrieved with the action of the CPC the assessee preferred the appeal before the Ld. CIT(A) and placed reliance and plethora of decisions consistently holding that filing of form 67 is not mandatory but directory in nature. Ld. CIT(A) after duly considering judicial precedence has allowed the foreign tax credit claimed by the assessee observing as follows: "3.2 My Observations: The appellant being a resident during the F.Y. 2023- 24 relevant to A.Y. 2024-25 had filed his original return of income in the status of resident for A.Y. 2024-25 on 18.07.2024. In the return of income the appellant has also included the salary income which he received in UK. The appellant has claimed relief u/s 90 for the taxes paid in UK. Foreign Tax C....
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....icial Gazette, make such provisions as may be necessary for implementing the agreement. 3.6 In the appellant case, he has paid taxes both in India and UK. He has produced before me the certificate of taxes paid in UK along with his written submissions. The AO, CPC should have considered the same in the rectification order before denying the claim of tax credit. For clarity Rule 128 is reproduced: 128 (1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India." One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same re....
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....company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account in [addition to any Indian tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph] the Indian tax payable by the company in respect of the profits out of which such dividend is paid. 2. Subject to the provisions of the law of India regarding the allowance as a credit against Indian tax of tax paid in a territory outside India (which shall not affect the general principle hereof), the amount of the United Kingdom tax paid, under the laws of the United Kingdom and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income from sources within the United Kingdom which has been subjected to tax both in India and the United Kingdom shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax. For the pur....
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.... to a period starting more than 10 fiscally years after the deduction in computing taxable income or exemption from, or reduction of, Indian tax is first granted to the resident of the United Kingdom or to the resident of India, as the case may be, in respect of that source. 6. Income which in accordance with provisions of this Convention is not to be subjected to tax in a Contracting State may be taken into account for calculating the rate of tax to be imposed in that Contracting State on other income. 7. For the purposes of paragraphs 1 and 2 of this Article profits, income and chargeable gains, owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with the provisions of this Convention shall be deemed to arise from sources in that other Contracting State. 3.8 As the appellant has filed Form No. 67, the AO,CPC should not have denied the claim of Foreign Tax Credit as clarified in the DTAA. Any provision as construed in Income tax Act/Rule should be to the benefit of the tax payer and not to overburden the tax payer. Further, as per Rule 128(9) does not say it is mandatory to file Form 67 to claim in o....