High Court Rules Foreign Tax Credit Cannot Be Denied Merely for late filing of Form 67

The Delhi High Court held that Foreign Tax Credit cannot be denied merely due to a delay in filing Form 67. It ruled that tax authorities, including PCIT under Section 264, have authority to grant relief and directed the AO to reconsider within two months.

Real Time Data Services Private Limited has filed three writ petitions against the income tax authorities in Delhi High Court, all concerning the denial of Foreign Tax Credit (FTC) for Assessment Year 2020-21 and related years. The key issue is related to the delay in filing Form No. 67 under Rule 128 of the Income Tax Rules, 1962.

In the present case, the petitioner company had not timely furnished Form No. 67 within the statutory time limit prescribed under Section 139 of the Income Tax Act, 1961. The company stated that it was not aware of the mistake committed by it and only got familiar with it when it received an intimation order passed by the Assessing Officer (AO) under Section 143(1)(a), through which the company’s Foreign Tax Credit of Rs. 1,01,34,300 deducted on foreign receipts was denied.

Thereafter, the petitioner company filed an application under Section 154 of the Act of 1961 before the AO for rectification and later approached the Principal Commissioner of Income Tax (PCIT) under Section 264 for revision. However, the PCIT rejected the petitioner’s application, holding that they do not have such powers to condone the delay in filing Form No. 67.

The company after that filed a writ petition before the Delhi High Court. When the court analysed the facts of the case, it held that the tax authorities cannot deny the company’s right to claim Foreign Tax Credit merely because Form No. 67 was not filed within the statutory due date. The Court noted that denying such credit due to a technical delay would amount to unjust enrichment by the tax department.

To announce the final decision, the court cited earlier judgements, ruling PCIT has sufficient powers to handle such cases under Section 264 of the Income Tax Act 1961. The court did not send the case back to the concerned authorities; instead, it directed the AO to check if the Form No. 67 was subsequently filed and, if so, to grant the Foreign Tax Credit as per the law. If the AO decides otherwise, a reasoned order must be passed. The exercise must be completed within two months.