Filing Form 67 Before Final Income Assessment is Sufficient Compliance: Madras HC Rules Rule 128 Directory, Not Mandatory [Read Order]

In a recent ruling, the Madras High Court held that filing Form 67 before the completion of final income assessment is sufficient compliance for claiming foreign tax credit (FTC), after observing that Rule 128 of the Income Tax Rules is directory and not mandatory.

Venkatanarayanan Somayaji Lakshminarasimha, the petitioner, filed a writ petition challenging the order dated 6 September 2024 passed by the Deputy Commissioner of Income Tax, Chennai, who had rejected his claim for FTC on the ground that Form 67 was not filed along with his return of income for the assessment year 2018-2019.

The petitioner had filed his return on 30 June 2018, declaring an income of Rs. 68,81,870, which included foreign salary income of Rs. 65,61,171, and claimed FTC of Rs. 18,85,919 withheld abroad by his employer. The return was accepted without objection, but the Centralized Processing Centre later denied the FTC claim on 14 May 2020 for non-filing of Form 67.

The petitioner filed Form 67 belatedly on 20 May 2020 and subsequently sought rectification under Section 154, but the request was rejected on the ground of delay.

The petitioner’s counsel argued that the delay in filing Form 67 was only a procedural lapse and not a substantive default. He argued that Rule 128 was intended to facilitate implementation of the Act and must be treated as directory.

The counsel relied on the Madras High Court’s decision in Duraiswamy Kumaraswamy v. PCIT (2023) and the Supreme Court ruling in CIT v. G.M. Knitting Industries (P) Ltd. (2015), both of which held that procedural forms, if filed before completion of assessment, would amount to sufficient compliance.

The respondent’s counsel fairly submitted that the same principle laid down in the earlier Madras High Court decision could be followed in this case as well.

The single-judge comprising Justice Krishnan Ramasamy observed that the petitioner had filed his return on time and disclosed the foreign income, which was duly accepted by the department. The court explained that the only objection was delay in filing Form 67, which could not by itself defeat the substantive claim for FTC.

The court pointed out that Rule 128 was directory in nature and filing Form 67 before completion of assessment was adequate compliance.

Based on these findings, the High Court set aside the order dated 6 September 2024, condoned the delay in filing Form 67, and directed the petitioner to pay Rs. 10,000 as costs to the Principal Government Naturopathy Medical College and Hospital within two weeks.

Upon proof of payment, the Deputy Commissioner was directed to reconsider the FTC claim and pass orders within two weeks thereafter. The writ petition was disposed of with these directions, and the connected miscellaneous petitions were closed.

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