Despite section 195 TDS breach, no section 40(a)(i) disallowance

Brief : Article 26(3) of the India-USA DTAA protects the interest of non residents vis-a-vis residents. Article 26(3) provides that payment made to a non-resident will be deductible under the same conditions as if the payment were made to a resident. The exceptions provided in Article 26(3) are not applicable on facts. As per s. 40(a)(i), no dis allowance can be made in respect of payments to residents on the ground of non-deduction of tax at source. Therefore, in view of Article 26(3), no dis allowance can be made even in case of payments to non-residents even if the amount is found taxable i...