TaxTMI 
TaxTMI 
2026 (8) TMI 677
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....4. Ground No.3 is with regard to disallowance u/s 36(1)(va) of the Income-tax Act, 1961 (for short 'the Act') in respect of the delay in deposit of employee's contribution to PF and ESI amounting to Rs. 11,32,606/-. In this regard, ld. AR submitted that for the year under consideration, in certain cases, the assessee had deposited employee's contribution made to PF/ESI after due date under the respective rules. However, since such payment was made before the due date of filing RoI i.e. November 30, 2017, same was claimed as allowable under section 36(1)(va). He submitted that however, in the impugned intimation, without appreciating the fact that payment was made before the due date of filing the RoI, a disallowance of Rs. 11,32,606 was made u/s 36(1)(va) of the Act. He submitted that the issue is covered by the decision of ITAT in ITA Nos.6600, 6601 and 6602/Del/2025 in the case of R.K. & Company Manpower (P.) Ltd. vs. DCIT dated 29.04.2026. 5. On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities. 6. Considered the rival submissions and material placed on record. We observed that this issue is squarely covered in favour of the assessee by th....
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....esidents 6,10,46,464 1,83,13,939 3 Amount payable to others 51,440 51,440 Total 7,72,01,140 2,31,96,350 He submitted that however, in the impugned intimation, without appreciating provisions of the applicable tax treaties, disallowance under section 40(a)(i) of the Act has been increased to 100% from 30% resulting in additional disallowance of Rs. 5,40,04,793 which is against the law and principle of judicial discipline and ought to be deleted. He submitted that this issue is squarely covered by the decision of ITAT in ITA No.2492/Del/2024 in the case of LinkedIn Technology Information vs. PCIT dated 09.01.2026. 10. On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities. 11. Considered the rival submissions and material placed on record. We find that the issue is covered by the decision of coordinate Bench in the case of LinkedIn Technology Information vs. PCIT (supra) and the relevant findings are reproduced below :- 14. In this context, we do not agree with the contention of Revenue that the scope of non-discrimination article is restricted to differential treatment of expenses incurred towards....
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....*** 50. **** As far as payment to a non-resident is concerned, Section 40 (a) (i) of the Act as it stood at the relevant time mandated that if no TDS is deducted at the time of making such payment, it will not be allowed as deduction while computing the taxable profits of the payer. No such consequence was envisaged in terms of Section 40 (a) (i) of the Act as it stood as far as payment to a resident was concerned. This, therefore, attracts the non-discrimination rule under Article 26 (3) of the DTAA. ***** 52. Section 40 (a) (i), in providing for disallowance of a payment made to a non-resident if TDS is not deducted, is no doubt meant to be a deterrent in order to compel the resident payer to deduct TDS while making the payment. However, that does not answer the requirement of Article 26 (3) of the DTAA that the payment to both residents and non-residents should be under the 'same conditions' not only as regards deduction of TDS but even as regards the allowability of such payment as deduction. It has to be seen that in those 'same conditions' whether the consequences are different for the failure to deduct TDS. ***** 54. In the first ....
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....on is what brings about the discrimination. The tested party is another resident Indian who transacts with a resident making payment and does not deduct TDS and therefore in whose case there would be no disallowance of the payment as deduction because TDS was not deducted. Therefore, the consequence of non-deduction of TDS when the payment is to a non-resident has an adverse consequence to the payer. Since it is mandatory in terms of Section 40 (a) (i) for the payer to deduct TDS from the payment to the non-resident, the latter receives the payment net of TDS. The object of Article 26 (3) DTAA was to ensure non-discrimination in the condition of deductibility of the payment in the hands of the payer where the payee is either a resident or a non-resident. That object would get defeated as a result of the discrimination brought about qua non-resident by requiring the TDS to be deducted while making payment of FTS in terms of Section 40 (a) (i) of the Act. 57. A plain reading of Section 90 (2) of the Act, makes it clear that the provisions of the DTAA would prevail over the Act unless the Act is more beneficial to the Assessee. Therefore, except to the extent a provision of t....
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....ial to the interest of the Revenue, is not satisfied, the assumption of jurisdiction by the PCIT u/s 263 cannot be held as valid under the law. We accordingly quash the order of PCIT u/s 263 as being invalid in law. The ground 2.2 and 2.4 of the assessee is accordingly allowed." 12. Respectfully following the aforesaid decision of the ITAT, we allow ground no.4 raised by the assessee and delete the addition. 13. Ground No.5 is with regard to double disallowance of Rs. 84,43,146/- under section 40(a)(ia) of the Act. 14. Ld. AR submitted that in the clause 21(ii)(A) of the TAR for the captioned assessment year, a sum of Rs. 5,13,99,933 was reported as expense on which tax was not deducted at source and the same was not allowable in view of provisions of section 40(a)(ia) of the Act. He submitted that out of the said amount Rs. 2,81,43,821 pertains to interest payable to medium small and micro enterprises ('MSMEDs'). He submitted that as the same was otherwise not allowable under the Act, the assessee disallowed the same under specific clause 19 of schedule BP of the Form ITR 6. He further submitted that however, in the impugned intimation, without appreciating the fact that ....
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....ing the fact that TDS and TCS credit available on PANs of merged entities also pertained to the assessee and TDS credit of Rs. 4,36,05,380 and TCS credit of Rs. 24,261 is denied to the assessee. He further submitted that the aforesaid TDS and TCS credit are erroneously disallowed and accordingly, requested to quash the adjustments in the impugned intimation in this regard. 20. On the other hand, ld. DR of the Revenue relied on the orders of the lower authorities. 21. Considered the rival submissions and material placed on record. We observed that the GE India Technology Centre Private Limited (PAN AABCG0559J) and GE India Exports Private Limited (PAN AABCG1257B) were merged with the assessee. The respective companies had TDS credits in their respective PAN, the same needs to allowed to the assessee to claim. Since the same was not granted to the assessee, we are inclined to remit this issue back to the file of AO to verify the claim of the assessee and allow the same after due verification as per law. In the result, ground raised by the assessee is allowed for statistical purposes. 22. In the result, the appeal filed by the assessee for AY 2017-18 is partly allowed as indi....