Income Tax Appellate Tribunal - Mumbai
Hrishikesh Sunil Shende,Vile Parle ... vs Income Tax Officer Circle 32 1 Mumbai , ... on 14 May, 2026
आयकरअपीलीयअिधकरण ायपीठमुंबईम ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"E (SMC)" BENCH, MUMBAI
BEFORE SHRI AMIT SHUKLA, JM
&
SHRI ARUN KHODPIA, AM
I.T.A. No.8149/Mum/2025
(Assessment Year: 2017-18)
Hrishikesh Sunil Shende Circle 32(1), Mumbai
5/62, Jai Hanuman Society, Kautilya Bhavan, BKC, Bandra East,
Paranjape Scheme, 1st Road, Vile Vs. Mumbai - 400051
Parle Eastt., Mumbai - 400057
PAN: ALWPS9138C
Assessee- अपीलाथ / Appellant : Revenue- थ / Respondent
Assessee by : Shri Dilip Bapat
Revenue by : Shri Ritesh Misra(CIT DR.)
Date of Hearing : 18.02.2026
Date of Pronouncement : 14.05.2026
ORDER
Per Arun Khodpia, AM:
This captioned appeal is filed by the assessee, challenging the order of Commissioner of Income Tax Appeal, NFAC, Delhi [in short, "the Ld. CIT(A)"] dated 30.09.2025, for the assessment year 2017-18, which in turn arises from assessment order u/s 143(3) of the Income Tax Act, 1961 ("the Act") dated ITA No.8149/Mum/2025 Hrishikesh Sunil Shende 16.11.2019, passed by Assistant Commissioner of Income Tax Circle 25(2), Mumbai (in short, "the Ld. AO").
The grounds of appeal of the assessee are as under:
"1. The learned Commissioner of Income Tax (Appeals) has erred in not admitting ground of appeal and related additional evidence in respect of the claim for exclusion from total income perquisites of Rs. 1,05,41,461/- being the value of stock options.
It is prayed that the ground of appeal be admitted and adjudicated on merits of the case.
2. Without prejudice and in the alternative, the learned Commissioner of Income Tax (Appeals) has erred in confirming denial of relief under section 90(1)(a)(i) of the Income Tax Act by way of credit of income tax of Rs. 25,47,094/- paid in the United States of America on the ground of the failure of the assessee to furnish form number 67 within the prescribed time.
It is prayed that form number 67 be admitted and the relief be granted on the merits of the case."
2. The concise facts of the case are that the assessee filed his return on income for the assessment year 2017-18 on 04.08.2017, declaring total income at Rs. 1,24,02,560/-. The case of assessee was selected for limited scrutiny due to claim of assessee for benefit of section 90/90A seeking tax relief for taxes paid out of India. Statutory notices were issued under section 143(2) and 142(1) of the Act. The counsel of assessee furnished necessary details before the Ld. AO. During the assessment proceedings the Ld. AO observed that the assessee has claimed a relief of Rs. 25,47,094/- under section 90 of the Income Tax Act against the taxes paid in USA as per India-USA DTAA. The assessee was asked to furnish details in justification of the said claim. The details were furnished by the assessee; however, it is revealed by the Ld. AO that as per Rule 128(9) of the Income Tax Rules the 2 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende assessee was required to submit a statement in form no. 67 before the due date of filing of return for claiming of deduction of foreign taxes paid. The assessee was show caused vide notice dated 02.11.2019, as to why the tax relief of Rs. 25,47,094/- be not withdrawn in the light of non-filing of form 67. In response to the aforesaid show cause, the assessee remained silent and also a copy of form 67 could not be furnished before the Ld. AO. Accordingly, the total income of assessee as per return of income was accepted,without, the tax relief benefit under section 90, which was withdrawn due to non-filing of form 67.
3. Aggrieved with the denial of tax credit, assessee preferred an appeal before the Ld. CIT(A),seeking relief against the denial of exemption under section 90(1)(a)(i) of the Act, Ld. CIT(A) after deliberations had dismissed the contention and appeal of the assessee with the following findings:
"4. Appellate Observations and Findings:
(i). I have perused the assessment order dated 16.11.2019, the written submissions of the Appellant filed on various dates, and the documents placed on record. The only issue for adjudication is whether the Appellant is entitled to claim Foreign Tax Credit (FTC) in respect of taxes paid in the United States on ESOP-related income, even though Form 67 was not filed along with the return of income or during the course of assessment proceedings. The appellant, however, has consistently claimed the condonation of the requirement of filing the prescribed form as per the regulations.
(ii). At the outset, it is noted that Rule 128(9) of the Income-tax Rules, 1962, as applicable to the year under consideration, clearly prescribes that Form 67 shall be furnished on or before the due date specified under section 139(1) for filing the return of income. The Appellant admittedly did not file Form 67 with the return of income, nor was it furnished at any stage before the assessing officer during the scrutiny assessment proceedings. It is only at the fag end of the assessment proceedings that Form 67 has been sought to be filed and request is being made to this appellate authority to condone the same.3 ITA No.8149/Mum/2025
Hrishikesh Sunil Shende
(iii). The Appellant has argued that FTC is a substantive right flowing from section 90 of the Act read with the applicable DTAA, and that the procedural lapse of non-filing of Form 67 should not defeat this substantive entitlement. Reliance has been placed on certain Tribunal rulings where delayed filing of Form 67 has been condoned.
(iv). It has been stated at appellate stage that the stock options were granted and vested in the appellant in the years in which the appellant was a non-resident. Therefore, in the years in which the value of options accrued to the appellant, no perquisite value could be charged to tax in India. Further, in the alternative, the status of the appellant should be adjudicated to be that of 'not ordinary resident' though this status was not so claimed in the return of income. If the appellant can persuade the learned appellate authority to accept this pleading, the value of stock options granted for services rendered outside India should be held to be not accrued in India and therefore, should not be charged to tax by virtue of the proviso to section 5(1)(c) of the Act.
(v). While I am mindful of the judicial views cited by the appellant, I find that the facts of the present case stand on a different footing. The Appellant is not an unrepresented or uninformed taxpayer. On the contrary, the Appellant is a salaried individual deriving income from ESOPs of a foreign employer, and is availing professional assistance for tax compliance. Thus, this is not a case of a poor or uneducated farmer or a small taxpayer unaware of technical requirements. The Appellant had sufficient opportunities to furnish Form 67; at the stage of filing the return and during the scrutiny assessment proceedings, when notices under sections 142(1) and 143(2) were issued instead of doing the same on 12.11.2019, just four days prior to passing the assessment order.
(vi). It is settled law that procedures and timelines prescribed under the statute are meant to bring certainty, finality and discipline in tax administration. The requirement of furnishing Form 67 within the prescribed time is not an empty formality but a statutory pre-condition designed to enable verification of foreign income and foreign taxes claimed as credit. Accepting such claims at the late assessment stage or at appellate stage, in the absence of compliance at the appropriate stage, would render the timelines prescribed in Rule 128 nugatory and would encourage indiscipline in statutory compliance.
(vii). The appellant has further argued that since the stock options were granted and vested in the appellant in the years in which he was a non-resident, the status of the appellant should be adjudicated to be 'non-ordinary resident' though this status was not so claimed in the return of income. This argument cannot be acceded to further same reasons and principles as observed and discussed in detail above. Again, the judicial precedents cited in this regard are not able to aid the appellant as they have been delivered on different factual matrix. Accordingly, the additional grounds and the additional evidences are dismissed without admission.
5. In these circumstances, I am unable to accept the plea that non-filing of Form 67 is a mere procedural lapse. It goes to the root of the mechanism prescribed under the Rules for granting FTC. The Appellant, having failed to comply with this statutory requirement despite being fully capable of doing so, cannot now seek condonation at the appellate stage as a matter of right.
6. In view of the above discussion, I hold that the assessing officer was justified in disallowing the claim of Foreign Tax Credit. The failure of the Appellant to furnish Form 67 within the prescribed time, disentitles him from such relief. The filing of Form 67 four days prior to the completion of the assessment cannot cure the default.
7. Accordingly, the withdrawal of the FTC is confirmed. The appeal on all grounds is dismissed. In result, the appeal is dismissed."
4 ITA No.8149/Mum/2025
Hrishikesh Sunil Shende
4. Being aggrieved with the aforesaid decision of Ld. CIT(A), confirming the denial of tax credit under section 90, the assessee preferred the present appeal.
5. At the outset, Ld. AR representing the assessee submitted to not press ground no. 1 of the present appeal, which in absence of any objection by the revenue,treated to be dismissed as not pressed.
6. Adverting to the contentions of assessee as per ground no. 2, wherein the assessee has requested for directions that form no. 67 of the assessee be admitted and the relief be granted on merits of the cases. It was a submission that during the year under consideration the assessee had received income in the form of ESOP perquisites amounting to Rs. 1,05,41,461/-, which was included in the total income declared by the assessee in the ITR, on which the employer or assessee had deducted tax at source under section 192 of the Act as per form no. 16 of the assessee. It is further clarified that the perquisites received by the assessee are charged to tax as the same are included in the income chargeable to tax under the head income from salaries. The ESOP option was granted by Cognizant Technology Solutions Corporation, USA, became vested in the assessee progressively through May 08 to May 2011 and the option was exercised in USA, the resultant receipts of shares were sold in USA by way of simultaneous transactions in the month of February/March 2017. It is submitted that all these information was first time placed before the Ld. CIT(A) with the relevant facts that 5 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende the appellant was resident but not ordinary resident (NOR)in India in the previous assessment year 2017-18, being the year under appeal, since he was a non-resident in nine out of ten previous years preceding to the relevant assessment year or having been in India for less than 729 days in the preceding seven years. To substantiate the aforesaid facts, copy of passport and assessee's arrival and departure details, starting from October 2005 upto July 2016 were furnished before the Ld. CIT(A). Further, it is submitted that the income accrued outside India cannot be charged to tax in terms of proviso to section 5(1)(c) of the Act. Alternatively, it is also claimed that the assessee was not a resident in India in the years in which the stock options were vested in him between May 2008 to May 2011, therefore, in the years in which the value of option was accrued to the assessee outside India, he was not a resident in India, thus, no perquisite value should be charged to tax under the Act. Reliance was placed in the case of Unnikrishnan V.S. in ITA No. 1200-1201/Mum/2018, stating that the ESOP benefits are accrued in the year in which such options vests with the employee. To substantiate all the aforesaid contentions, the assessee had submitted additional evidence in support of aforesaid claims and have requested for revisiting the facts of the case in the context of applicable provisions of law. Though such evidence and facts are first time produced before the Ld. CIT(A) after the conclusion of assessment but before filing of the appeal. It is also submitted that the requisite 6 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende form 67 has been filed by the assessee on 12.12.2019,i.e., before passing of the order under section 250 by the Ld. CIT(A) dated 30.09.2025 and requested to consider the same for granting of credit of taxes paid outside India. Alternatively, it is also contended that the income which is included by the assessee as perquisite for the relevant year under the head salary while computing the income taxable in India,was actually not taxable in terms of the additional facts and evidence produced before the Ld. CIT(A).The assessee was not an ordinary resident or non- resident in the years when ESOP perquisiteswerevested with him. The Ld. CIT(A) was having all such details before him, but had simply brushed aside the contentions of the assessee without adverting to the additional evidences furnished by him, without examining the same or by calling a remand report from the Ld. AO. Ld. CIT(A) observed that this argument cannot be acceded to, while the assessee has negated the timelines prescribed in Rule 28 by not filing form 67 treating the same as mere a procedural lapse. In view of the aforesaid facts and circumstances, it was the prayer that either the form 67 filed by the assessee may be treated as a valid form 67 and tax credit be granted to assessee or the income received in the form of perquisite on exercising the issue of the benefits by the assessee shall be treated as income not taxable in India on account of assessee's NOR residential status as explained supra.
7 ITA No.8149/Mum/2025
Hrishikesh Sunil Shende
7. Per contra the Ld. DR vehemently supported the orders of the revenue authorities.
8. We have considered the rival submissions, perused by the material available on record and the case was relied upon by the assessee. Apparently, in present case the assessee was failed in filing of form 67, within the prescribed time limits as per Rule 128 of the Act. However, the assessee complied to the same during the appellate proceedings before the Ld. CIT(A). Such action of the assessee was not accepted by the Ld. CIT(A), stating that the assessee was failed in availing the opportunities granted by the Ld. AO, during the assessment proceedings. The alternate claim of assessee, after filing additional evidence, was to allow credit of taxes paid by the assessee in USA on ESOP benefits and / or the perquisites which is declared as taxable income by the assessee, cannot be taxed in India on account of assessee's residential status as NOR during the relevant year and non-resident in preceding ten / seven years. The details of the residential status, arrival and departure of the assessee during such period are furnished before the Ld. CIT(A) along with the copy of passport of the assessee. A plea was made before the Ld. CIT(A) to consider such submissions and allow the claim of assessee, which was first time made before him. Ld. CIT(A) simply rejected the contentions of the assessee, observing that any new claim cannot be considered, while the assessee was a defaulter in terms of not filing of return under section 67 within the 8 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende prescribed time. Before us, assessee submitted copies all the aforesaid evidence and prayed that form 67 of the assessee though filed belatedly may be admitted in terms of decision in the case of ACIT v. Shri Venkateshwara Rao ITA No. 17/Viz/2023 and Vinodkumar Lakshmipathi v. CIT(A) ITA No. 680/Bang/2022,wherein the tribunals in their respective orders had held that "There is no express provision in the India and USA DTAA, that the foreign tax credit shall be denied on failure of submission of statement in form 67, within the due date prescribed under section 139(1) of the Act, that Rule 128(9) of the Income Tax Rules, does not provide for disallowance of FTC in case of delay in filing of form no. 67.Filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act.The Rules cannot be contrary to the Act. Therefore, non-furnishing of form 67 before the due date under section 139(1) of the Act is not fatal to the claim for FTC." Regarding admission of the new claim, first time before the Appellate Authority, the assessee placed his reliance on the following decisions:
Sl No. Case Law Citations
1. CIT Vs Pruthvi Brokers & Shareholders Pvt Ltd-Bombay High Court- 349 ITR 336
2. ACIT Vs Siva Equipment Pvt Ltd - ITA No. 424/PNJ/2013
3. Siva Equipment Pvt Ltd - Bombay High Court - 423 ITR 20
4. CIT Vs. Suretech Hospital and Research Centre Ltd - Bombay High Court - 293 ITR 53
5. IP Softcom (India) Pvt Ltd - ITA No. 2764/Chny/2019 9 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende
7. Considering the aforesaid submissions, facts, circumstances and jurisprudence relied upon by the assessee, we deem it appropriate to set aside the order of Ld. CIT(A) and direct the Ld. AO to allow tax credits claimed in form 67 filed by the assessee, as the delay in filing of form cannot be the sole reason for denial of tax credit for taxes paid out side India, as held by ITAT, Bangalore in the case of Vinodkumar Lakshmipathi v. CIT(A) (supra), wherein the relevant findings of the tribunal are as under:
" 4. We have heard the rival submissions and perused the materials available on record. The claim of the assessee has been denied while processing return of the assessee u/s 143(1) of the Income-tax Act, 1961 ['the Act for short] dated 11.6.2020 on the reason that assessee has not filed the Form No.67 along with return of income so as to claim the foreign tax credit. However, the same has been filed before the Ld. CIT(A) on 22.9.2018. The assessee has made the contention before Ld. CIT(A) that assessee has offered the foreign income of Rs.2,01,024/- and also paid tax on it at Rs.63,342/ and levying of additional tax of Rs.28,431/- is amounting to double taxation. In our opinion, the plea of the assessee is justified. The assessee has filed the copy of Form No.67 before Ld. CIT(A). He ought to have given direction to give credit for foreign tax which has been paid as per Form 67.
5. Further, we note that on identical issue, This Tribunal in the case of Brinda Rama Krishna (in ITA No. 454/Bang/2021 for AY.2018-19), order dated 17.11.2021 held that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Therefore, non-furnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. The findings of this Tribunal are reproduced below:
"2. The Assessee is an individual and during the previous year relevant to AY 2018-19 an ordinary resident in India. The Assessee worked with Ernst & Young Australia from 20.11.2017 till 16.05.2019. Since her global income was taxable in India, the Assessee offered to tax salary income earned for services rendered in Australia for the period from December 2017 to March 2018 to tax in India. The Assessee claimed foreign tax credit ("FTC") for taxes paid in Australia.
3. There is no dispute that the Assessee is entitled to claim FTC. Rule 128 of the Income Tax Rules, 1962 (Rules) provides for giving FTC and reads thus:
"Foreign Tax Credit.10 ITA No.8149/Mum/2025
Hrishikesh Sunil Shende
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 reads thus:
"(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:-
(i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein;
(ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,-
(a) from the tax authority of the country or the specified territory outside India; or
(b) from the person responsible for deduction of such tax; or
(c) signed by the assessee:
Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by,-
(A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee;
(B) proof of deduction where the tax has been deducted.
(9) The statement in Form No.67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under subsection (1) of section 139, in the manner specified for furnishing such return of income."
4. The Assessee claimed FTC of Rs. 4,73,779/- w/s. 90 of the Act read with Article 24 of India Australia tax treaty ("DTAA") in a revised return of income filed on 31.8.2018. The Assessee had not filed the Form 67 before filing the return of income. On realising the same, the Assessee filed Form 67 in support of claim of foreign tax credit on 18.04.2020. The revised return of income was processed by Centralized Processing Centre (CPC) electronically and intimation u/s 143(1) of the Act on 28.05.2020 was passed disallowing the claim of FTC.
11 ITA No.8149/Mum/2025
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5. The Assessee filed a rectification application before the AO on 15.06.2020 & 25.02.2021 and submitted that credit for FTC as claimed in the return should be given. In the rectification order dated 10.03.2021, the AO upheld the action on the ground that the Assessee has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) of the Rules.
6. On appeal by the Assessee, the CIT(A) vide Order dated 03.09.2021 confirmed the Order of AO. The CIT(A) held that the Assessee has not filed Form 67 before the time allowed under section 139(5) of the Act, and therefore Form 67 is nonest in law. The CIT(A) also held that provisions of Rule 128 are mandatory in nature. The CIT(A)rejected the contention of the Assessee that filing of Form 67 is a procedural requirement and noncompliance thereof does not disentitle the Assessee of the FTC.
7. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee submitted that disallowance of FTC is bad in law. He submitted that Section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 24 of India Australia DTAA provides for credit for foreign taxes. Article 24(4)(a) is relevant in the present context. Same is extracted below:
"4. In the case of India, double taxation shall be avoided as follows:
(a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia 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;"
It was submitted by him that section 90 of the Act read with Article 24(4)(a) provides that Australian tax paid shall be allowed as a credit against the Indian tax but limited to proportion of Indian tax. Neither section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements. FTC is Assessee's vested right as per Article 24(4)(a) of the DTAA read with Section 90 and same cannot be disallowed for non-compliance of procedural requirement that is prescribed in the Rules.
8. It was further submitted by him that Section 295(1) of the Act gives power to the CBDT to prescribe Rules for various purposes. Section 295(2)(ha) gives power to the Board to issue Rules for FTC. The relevant extract is as follow:
"(2) In particular, and without prejudice to the generality of the foregoing power. such rules may provide for all or any of the following matters:-
..............................
(ha) the procedure for granting of relief or deduction, as the case may be, of any income-
tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act;"
9. It was submitted that the Board has power to prescribe procedure to granting FTC. However, the Board does not have power to prescribe a condition or provide for 12 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende disallowance of FTC. The procedure prescribed in Rule 128 should therefore be interpreted in this context. Rule 128 is therefore a procedural provision and not a mandatory provision.
10. It was further submitted that Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. The learned counsel for the Assessee submitted that in case the intention was to deny the FTC, either the Act or the Rules would have specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due date prescribed under section 139(1) of the Act. It was submitted that that there are many sections in the Act which specifically deny deduction or exemption or relief in case the return is not filed within prescribed time. Reference was made to section 80AC, 80-IA(7), 10A(5) and 10B(5). Such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128(9).
11. It was further submitted that Filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. It was submitted that violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. Reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, (1992 Supp (1) Supreme Court Cases 21) wherein it observed that:
"The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve."
Further reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Sambhaji and Others v. Gangabai and Others, reported in (2008) 17 SCC 117, wherein it has been held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. It was submitted that filing of Form 67 as per the provisions of section 90 read with Rule 128(9) is a procedural law and should not control the claim of FTC.
12. It was further submitted that even in the context of 801A(7), 10A(5) etc, wherein there is specific provision for disallowance of deduction/exemption if audit report is not filed along with the return, various High Courts have taken a view that filing of audit report is directory and not mandatory. Reliance in this regard was placed on the following cases:
• CIT vs Axis Computers (India) (P.) Ltd [2009] 178 Taxman 143 (Delhi) • PCIT, Kanpur vs Surya Merchants Ltd [2016] 72 taxnann.com 16 (Allahabad) • CIT, Central Circle vs American Data Solutions India (P.) Ltd [2014] 45 taxmann.com 379 (Karnataka) 13 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende • CIT-II vs Mantec Consultants (P.) Ltd (2009) 178 Taxman 429 (Delhi) • CIT vs ACE Multitaxes Systems (P.) Ltd [2009] 317 ITR 207 (Karnataka).
13. It was submitted that as per the provisions of section 90(2) of the Act, where the Central Government of India has entered into a DTAA, the provisions of the Act would apply to the extent they are more beneficial to a taxpayer.
Therefore, the provisions of DTAA override the provisions of the Act, to the extent they are beneficial to the assessee. Reliance in this regard is placed on the following cases and circulars:
Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) CIT v Eli Lily & Co (India) P Ltd (2009) 178 Taxman 505 (SC) GE India Technology Centre P Ltd v CIT (2010) 193 Taxman 234 (SC) Engineering Analysis Centre of Excellence P Ltd v CIT (2021) 125 taxmann.com 42 (SC) (Pg 106-109 of PB 2-Para 25 & 26) CBDT Circular No 333 dated 2/4/82 137 ITR (St.) It was submitted that when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision. As the provisions of DTAA override the provisions of the Act, the Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision.
14. The learned DR reiterated the stand of the revenue that rule 128(9) of the Rules, is mandatory and hence the revenue authorities were justified in refusing to give FTC. He also submitted that the issue was debatable and cannot be subject matter of decision in Sec.154 proceedings which are restricted in scope to mistakes apparent on the face of the record.
15. In his rejoinder, the learned counsel for the Assessee submitted that Form No.67 was available before the AO when the intimation /s. 143(1) of the Act dated 28.5.2020 was passed. He pointed out that the AO or the CIT(A) did not dismiss the Assessee application for rectification w/s.154 of the Act on the ground that the issue was debatable but rather the decision was given that the relevant rule was mandatory and hence non-furnishing of Form No.67 before the due date w/s.139(1) of the Act was fatal to the claim for FTC.
16. I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings /s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings w/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities 14 ITA No.8149/Mum/2025 Hrishikesh Sunil Shende rejected the Assessee's application u/s. 154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard.
17. In the result, the appeal is allowed."
6. In view of the above order of the Tribunal, we direct the AO to give credit for foreign tax as per Form 67 filed on 22.9.2018 before Ld. CIT(A) after due verification."
6. We thus, in terms of aforesaid observations of the tribunal directed the Ld. AO to allow the claim of assessee for taxes paid outside India and re adjudicate the issue considering assessee's claim on the basis of his residential status after factual verifications and examination of additional evidence furnished by the assessee before the Ld. CIT(A).
5. In result, the appeal of assessee stands allowed for statistical purposes, in terms of aforesaid observations.
Order pronounced in the open court on 14-05-2026.
Sd/- Sd/-
(AMIT SHUKLA) (ARUN KHODPIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 14-05-2026.
Soumili Das, PS
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ITA No.8149/Mum/2025
Hrishikesh Sunil Shende
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. DR, ITAT, Mumbai
4. Guard File
5. CIT
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai
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