The Gujarat High Court has allowed the petition of Deepak Pragjibhai Gondaliya, who was earlier denied foreign tax credit due to the delayed filing of Form 67 under Rule 128 of the Income Tax Rules. The court set aside the rejection order of the Principal Commissioner of Income Tax terming the denial of DTAA benefit as unjustified and contrary to the spirit of justice.
The Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi ruled that the petitioner’s claim was valid, backed by proper tax deduction certificates from Bangladesh. The procedural requirement of filing Form 67 is not so sacrosanct that its delay should override a genuine claim for relief under DTAA.
The bench relied on numerous precedents including Sitaldas K. Motwani, Pankaj Kailash Agarwal, and others, the court emphasized that procedural lapses, when not motivated by malafide intent, should not defeat substantive claims.
The appellant/assessee who was employed as Executive Vice President in Bangladesh with Square Pharmaceutical Ltd., earned a salary of ₹42.46 lakh (INR equivalent) during the Assessment Year 2020–21. Taxes on this income were duly paid in Bangladesh, and a foreign tax credit of ₹13.03 lakh was claimed under the India-Bangladesh Double Taxation Avoidance Agreement (DTAA).
Although he filed his return of income on time, he submitted Form 67—mandatory to claim foreign tax credit—after the due date, specifically on January 4, 2022. The Income Tax Department processed his return under Section 143(1) without granting the foreign tax credit, citing non-compliance with Rule 128(9), which mandates Form 67 to be filed before the due date of return under Section 139(1).
The department argued that Mr. Gondaliya did not demonstrate “genuine hardship” for the delay in filing Form 67. They maintained that compliance with Rule 128 was mandatory and the procedural lapse disentitled him from availing the DTAA benefit.
The court criticized the mechanical approach of the tax authorities and reiterated that Section 119(2)(b) empowers tax officers to condone such procedural delays to advance substantive justice.
The High Court quashed the rejection order dated December 23, 2022, and directed the department to pass a fresh order condoning the delay in filing Form 67, allow the foreign tax credit under DTAA, and issue a revised intimation under Section 143(1) within 12 weeks.
Case Details
Case Title: Deepak Pragjibhai Gondaliya Versus Principal Commissioner Of Income Tax Vadodara 1
Case No.: R/Special Civil Application No. 3445 Of 2024
Date: 10/06/2025
Counsel For Appellant: Mr Sudhir M Mehta
Counsel For Respondent: Karan G Sanghani
