NATWEST DIGITAL SERVICES INDIA PRIVATE LIMITED (SUCCESSOR TO NWM SERVICES INDIA PRIVATE LIMITED),GURUGRAM vs. ASSESSMENT UNIT (JAO - DCIT, CIRCLE 3(1), GURUGRAM), GURUGRAM

PER ANUBHAV SHARMA, JM:

These are appeals preferred by the two assessee, but related entites,

against the orders of the Ld. Assessing Officer(hereinafter referred to as the

Ld. AO, for short) u/s 143(3)/144C of the Income Tax Act, 1961 with the

direction of Dispute Resolution Panel-1 u/s 144C of the Income Tax Act,

1961 for AYs: 2020-21 & 2021-22.

engaged in providing technology support and information technology

P a g e | 3 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 services and support services to affiliated companies for products and

services related to computer networking and cyber security.

The Appellant No. 1, filed its original return of income for AY 2021-22

declaring total income of INR 46,61,76,784 and claiming a refund of IN

5,92,39,960. The Appellant, pursuant to a scheme of amalgamation passed by

NCLT dated 29th April 2022 got transferred on a going concern basis to Nat

West Digital Services India Private Limited (NWD SIPL') with an appointed

date of 01 August 2020 which is during the year under consideration.Giving

effect to the NCLT's order and as per the requirement of Section 170A of the

Income Tax, 1961 (‘the Act'), NWD SIPL duly filed ITR-A on 30" March

2023. As the time limit prescribed under section 139(5) of the Act to file the

revised return expired and there were no provisions prescribed under the Act

for the amalgamating entity to file ITR-A, the Appellant could not file its

revised return of income. But, the Appellant duly submitted the revised

computation of income before the AO for the period of 1 April 2020 to 31

July 2020 which is made available in Paper Book Pages 141.

P a g e | 4 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 3.1 An intimation order was issued u/s 143(1) of the Act on 21 October

2022 vide which the deduction of expenses claimed u/s 43B were disallowed

amounting to INR 4,81,42,250. The Appellant being aggrieved by the

intimation order issued u/s 143(1) filed an appeal before the Ld. CIT for the

disallowances made u/s 43B. The Ld. CIT(A) passed an order dated 19

November 2024 vide which all the disallowance u/s 43B were deleted.

3.2 In the draft assessment order dated 06th December 2023, issued under

section 144C(1) of the Act, the Assessing Officer ('AO') proposed transfer

pricing adjustments amounting to INR 7,73,78,620. The Appellant aggrieved

by the additions proposed in the draft assessment order filed objection before

the DRP on 04 January 2024, challenging the proposed transfer pricing

adjustments.

3.3The DRP vide its order dated 11 September 2024 reduced the transfer

pricing additions to INR 6,70,73,930 and directed the AO to consider the said

additions in the final order.

3.4 Final assessment order was passed u/s 143(3) dated 30 October 2024,

wherein the AO considered the reduced disallowances and passed the final

order at assessed income at INR 11,77,74,081 and raised a demand of INR

P a g e | 5 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 56,86,940. The Appellant, being aggrieved by the order passed by the Ld. AO

has preferred the present appeal and ld. Counsel has not argued on leal

grounds. It was contended that the Ld. AO has erred in not considering the

total income declared in the amended income tax return filed by NWM

Services India Private Limited ('NWM SIPL) for the period 1 April 2020 - 31

July 2020, pursuant to amalgamation of NWM SIPL'with NatWest Digital

Services India Private Limited ('NWD SIPL), with 1 August 2020 as the

appointed date.

3.5 It was also submitted that at the time of filing the revised computation

for the period of 4 months (i.e., April 2020 - July 2020), the Appellant had

split the advance tax challans proportionate to the income attributable to the

4-month period. In the course of apportioning the tax payments, a challan

bearing reference number 23204, amounting to INK 3,00,00,000, was

allocated to the extent of INR 88,62,953 to the Appellant, being the

amalgamating company, while the balance amount of INR 2,61,37,047 was

claimed by Nat West Digital, being the amalgamated company.Whereas, in

the computation of income issued by the AO, the credit of amount of TDS,

advance tax and TCS is same as claimed in the original return of income and

P a g e | 6 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 the revised 4-month period income tax computation and income tax return

furnished by the Appellant was completely disregarded.

3.6 Settled law is that real and actual income should be taxed. If there was

any change in the reportable income of the entity consequent to

amalgamation then that only should be considered for determining tax

liability. As ld. DR was unable to show any specific provision which

provides for filing any return or compliance to take into consideration the

income after amalgamation, we consider it appropriate to restore the issue

back to files of ld. AO, to take into consideration the revised computation of

income submitted by the Appellant. Once the income as per amended income

tax return is considered, the Ld. AO is directed to apportion / transfer the

advance tax between successor entity (i.e., NWD SIPL) and NWM SIPL, as

per law.

3.7 Then ld. with regard toGround No. 8, it was submitted that the

computation sheet issued by the Ld. AO along with the final assessment order

passed under Section 143(3) reflects an inadvertent error. The Ld. AO has

incorrectly reported the total interest and fees payable in Column 42 of the

computation sheet as IN 4,28,823, despite the fact that no interest under

P a g e | 7 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 Sections 234A, 234B, 234C, 234D or 234F has been computed therein. This

appears to be a clerical mistake, accordinly the said figure be rectified and

deleted accordingly.

3.8 In aforesaid terms corresponding grounds are allowed and the appeal

ITA No. 5809/Del/2024 AY: 2021-22,is allowed with consequences to

follow as directed.

it come up that the Appellant no 1 filed its revised return of income for AY

2020-21 on 31 May 2021, declaring total income of INR 69,50,07,540 and

claiming a refund of IN 4,86,18,800 and an intimation order was issued u/s

143(1) of the Act on 26 December 2021 vide which the deduction of

expenses claimed u/s 43B and u/s 36(1)(va) were disallowed amounting to

INR6,20,10,586. During the assessment proceedings the AO issued show

cause notice(SCN) to the Company to provide the reason for not considering

the additions of INR 6,20,10,586 made vide the CPC vide intimation order

u/s 143(1). After considering the company's response to the SCN, the AO

vide its draft order u/s 144C(1) dated 26 September 2023 deleted the

erroneous addition of INR 2,09,72,984 towards leave encashment and

P a g e | 8 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 gratuity, as it was due to inter-company employee transfers (balance sheet to

balance sheet transaction) and payments made after filing the TAR but before

filing the ITR. However, sustained the addition of INR 4,10,37,602 towards

employees' contribution to provident fund, relying on the Supreme Court

decision in the case of M/s Checkmate Services P Ltd [143 taxmann.com

178].

4.1 Additional evidence regarding disallowance u/s 36(1)(va) were

submitted before the DRP but the DRP noted that the Appellant's technical

challenge to jurisdiction was beyond its mandate. However, it directed the

AO to address the aforesaid concerns in the final order, as the Appellant was

not given an opportunity to present its case.

4.2 Final assessment order was passed u/s 143(3) dated 16 July 2024,

wherein the AO did not consider the evidences submitted by the Assessee

and concluded that the matter has been already settled by the Hon'ble

Supreme Court in the case of M/s Checkmate Services P Ltd.The Appellant,

being aggrieved by the order passed by the Ld. AO has preferred the present

appeal.

P a g e | 9 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22

As with regard to ground no. 2.1 arising out of disallowance under 4.3

section 36(1)(va) of the Act on account of employee's contribution to

provident fund. It was submitted before us that NWD SIPL made provident

fund payments totaling of IN 8,04,95,120, including INR 4,09,85,828 as

employee's contribution to the provident fund. The Appellant has reported

this amount in Form 3CD and claimed the corresponding deduction. The

details of the amount along with the challan number was provided to the

Bench and same is reproduced below:

Month Total Employee Due date Date of Actual Challan reference Total Challan Contribution Payment (As per number Amount Bank Statement) Apr-19 94,52,984 15-May-19 15-May-19 2031905012940 1,86,21,082 Jun-19 1,06,85,002 15-Jul-19 12-Jul19 2031907010861 2,07,87,295 Sep-19 1,03,56,207 15-Oct-19 14-Oct-19 2031910009084 2,03,99,743 Feb-20 1,04,91,335 15-Mar-20 12-Mar-20 2032003008328 2,06,87,010 Total 4,09,85,528 8,04,95,130

4.4 We find from aforesaid that payments for the statutory liability were

debited from NWD SIPL's bank account before the due date i.e., well within

the statutory due date, but was credited to EPFO account after the due date

due to technical issues on the portal. Bank statements and corresponding

challans are made available from page no. 291 to 299 of Paper book

depicting that the payment was made before the due date. The Co-ordinate

P a g e | 10 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22

bench in the case of FIL India Business & Research Services (P.) Ltd. vs.

DCIT (2023) 154 taxmann.com 251 (Delhi- Tribunal), has held that when the

Assessee had initially deposited employees contribution towards PF before

prescribed due dates but due to glitches on online portal at the end of

respective authorities, amounts were reversed by the bank, then assessee

could not be penalized with addition on account of delayed deposits.

4.5 Accordingly we allow the appeal of assessee and remit issue to the files

of AO, to verify the payments, and allow the expenditure.

In ITA No. 4154/Del/2024 AY: 2020-21, (Appeal filed by appellant 5.

no. 2) Ground No. 6 arises out of, disallowance made under section 36(1)(va)

of the Act on account of delayed deposit of employee's contribution to

provident fund. The issue is similar to one decided above in case of appellant

No. 1, above in para 4 with sub paras. The details of the amount along with

the challan number has been provided to the Bench and same is reproduced

below:

Month Total Employee’ Due date Date of Actual Payment Challan reference Total Challan Contribution (As per Bank Statement) number Amount April 19 5,97,69,717 15-May-2019 14-May-19 and 15-May- 002140519611665 3,31,67,648 and 2019 and 1091394 and 002140519612154 8,15,67,148 And 002150519640932 June 19 7,26,85,170 15-Jul-2019 13-July-2019 002130719781966 10,85,78,014 and And 10,83,447 and

P a g e | 11 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22

002130719781778 3,22,55,487 And 002130719781596 Nov 19 7,27,51,525 15- December-2019 13-Dec-2019 002121219932730 3,07,21,158 and and 10,23,643 and 002121219934038 10,90,76,273 and 00212129934623 Feb 20 7,36,33,328 15-Mar-20 12-Mar-2019 002120320858114 11,00,28,144 and and 3,04,19,569 ad 00212032085095 10,06,276 and 002120320858131

5.1 Accordingly, we allow the appeal of assessee and remit issue to the

files of AO, to verify the payments, and allow the expenditure.

5.2 Then Ground No. 7, arises out of disallowance of payment made

towards leave encashment, labor welfare fund, pension and gratuity under

section 43B of the Act. Ld. Counsel has submitted that, the Appellant paid

the leave encashment amount from a pre-existing liability, which was

disallowed in the ROL of the relevant year. The amount was claimed as a

deduction on a payment basis in the ROI. The difference between the

amounts in Form 3CD and ROI is due to the liability paid after filing Form

3CD but before the ROI due date. This was submitted on the e-filing portal

on 3 November 2021, in response to the intimation under section 143(1)(a)

dated 7 October 202l.

P a g e | 12 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 5.3 Similarly, during the year, the Assessee disallowed IN 108,13,91,601

under section 43B for Gratuity, Pension, and Labour Welfare Fund as these

amounts were unpaid by the due date of filing the Return of Income (ROL).

Ld. Counsel has stated that the difference between the amounts reported in

Form 3CD and the ROl arises from two main factors:

Labour Welfare Fund Contribution: A contribution of IN 5,80,524 was

made after filing Form 3CD but before the due date of filing the ROI. This

payment is evidenced by a challan.

Inter-group Transfers: There were inter-group transfers of assets/liabilities

related to pension and gratuity, amounting to INR 1,52,26,107, IN

18,72,08,800, and INR (1,60,53,530). These transfers were made directly

between balance sheets and not through the profit and loss account.

Consequently, these amounts were adjusted in the tax audit report (TAR) but

not reflected in the ROI.

5.4 As, the tax auditor has disclosed these facts in the notes to Form 3CD,

which have been uploaded to the Income Tax Portal, we direct the ld. AO to

verify, and allow the expenses.

P a g e | 13 3 Appeals Natwest Digital Services India Ltd. AY: 2020-21 & 2021-22 6. In the light of aforesaid discussion, the appeals of Both the appellants is

allowed with consequences to follow as directed above.

Order pronounced in the open court on 22.04.2026

Sd/- Sd/- (M Balaganesh) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 22.04.2026 Rohit, Sr. PS