IQVARDS (India) Private Limited Vs DCIT (ITAT Bangalore)
The appeal before the ITAT Bangalore arose from an assessment order passed under Sections 143(3), 144C and 92CA of the Income Tax Act for Assessment Year 2013-14. The Assessing Officer determined the assessee’s total income at ₹8.59 crore as against the returned income of ₹1.26 crore after making transfer pricing adjustment of ₹6.61 crore, disallowance under Section 36(1)(va) of ₹34.13 lakh, and disallowance under Section 40(a)(i) of ₹37.74 lakh.
During the hearing, the assessee sought withdrawal of transfer pricing grounds following resolution of the transfer pricing adjustment under the Mutual Agreement Procedure (MAP) dated 11.02.2022. Consequently, the transfer pricing dispute did not survive. The assessee also did not press the ground relating to delayed payment of PF under Section 36(1)(va) in view of the Supreme Court decision in Checkmate Services Pvt. Ltd. v. CIT.
The remaining issue concerned disallowance under Section 40(a)(i) for non-deduction of tax at source on computer license fees of ₹6.80 lakh and recruitment expenses of ₹30.93 lakh. The Assessing Officer treated the payments as fees for technical services. The assessee submitted that the issue had already been settled by the recipient of the income under the Direct Taxes Vivad se Vishwas Scheme, 2024 (VSVS). Reliance was placed on FAQ No.58 of CBDT Circular No.19/2024, which clarified that where the deductee settles liability under VSVS, consequential relief would also be available to the deductor.
