When Mr Gupta from IP Extension, Delhi got the opportunity to work in Australia, he jumped at the opportunity and earned a salary of Rs 14.16 lakh for his work. However, he mistakenly reported this income in his income tax return (ITR) in India. The ITR was for AY 2020-21 and was filed on September 29, 2020.
Since he was abroad for the entire year and got the salary from the Australian company for his services rendered over there, technically Indian tax authorities could not demand any tax from him. But since Gupta himself declared the Australian salary as taxable in India when filing his income tax return for AY 2020-21, even though, under Article 15 of the India-Australia DTAA, it should not have been taxed in India, it caused trouble for him.
Moreover, the salary received in Australia was subjected to taxation in Australia as per their tax laws and a sum of Rs 3.4 lakh was deducted as tax at source in Australia. Thus when Gupta realised his mistake, he filed Form 67 claiming foreign tax credit (FTC) for the Australian taxes paid and sought rectification under Section 154 to exclude the Australian salary from his Indian taxable income. The CPC, Bangalore rejected the rectification application.
Feeling aggrieved he filed an appeal first with CIT (A) and later with Income Tax Appellate Tribunal (ITAT) Delhi.
Mr Vinod Bindal, Chartered Accountant Ms. Rinky Sharma and Advocate Amol Jha represented Gupta before ITAT Delhi.
Gupta's CA and lawyers relied on Article 15 of the Double Taxation Avoidance Agreement (DTAA) between India and Australia, and sought for exclusion of salary income from taxation in India as the Article stipulates that salary would be taxable only in the state where services were rendered.
On June 30, 2026, the Delhi ITAT partly ruled in his favour and held that salary earned in Australia for services performed there cannot be taxed in India under the India-Australia DTAA, but consequently Gupta was also not given foreign tax credit for Australian taxes paid because the income is not taxable in India.
Mihir Tanna, associate director, S.K Patodia LLP said to ET Wealth Online : "Vide Notification No. 100/2022 dated August 18, 2022, the Income Tax Department amended the Income-tax Rules, providing major relief to taxpayers regarding the claiming of Foreign Tax Credit (FTC).
Starting from FY 22-23, the statement to claim foreign tax credit in Form No. 67 can be furnished on or before the end of the relevant Assessment Year. Before this change, "Tanna says that Form 67 was required to be filed on or before the due date of the original income tax return to claim a Foreign Tax Credit (FTC). However, several judgments state that the Form 67 time limit is directory and not mandatory in nature.
ITAT Delhi order:
The core point to be seen is that the salary income per se received in Australia for services rendered in Australia is not taxable at all in India in the hands of the assessee in view of Article 15 of India-Australia DTAA. Hence, ITAT Delhi directed the AO to exclude the salary income of Australia from the total income of the assessee. Correspondingly, the foreign tax credit of Rs 3,40,428 was also not eligible to be given to the assessee. The grounds raised by the assessee are allowed.
