IBM INDIA PRIVATE LIMITED ,BANGALORE vs. DCIT, CIRCLE-3(1)(1), BANGALORE

ITTPA 1178/BANG/2025Status: DisposedITAT Bangalore06 April 2026AY 2008-097 pages
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What were the facts?

The assessee, M/s. IBM India Private Limited, filed an appeal against the assessment order for AY 2008-09. The dispute centers on a disallowance of INR 32,69,18,269 under Section 40(a) of the Income Tax Act, 1961, for payments made to associated enterprises and non-AEs where tax deduction at source was allegedly not made. The assessee contended these payments were for imports below the TDS threshold and not taxable in India. The Dispute Resolution Panel (DRP) upheld the disallowance due to insufficient details. The assessee also contested a restriction on TDS credit claimed. The matter had been remanded multiple times by the ITAT to the DRP. The DRP, in its latest directions, allowed certain claims but upheld the disallowance of INR 32,69,18,269.

What did the Tribunal hold?

The Tribunal decided that the disallowance of INR 32,69,18,269 under Section 40(a) of the Act was unjustified. The Tribunal noted that the assessee had provided comprehensive details via email on 24.03.2021, including a reconciliation of expenditure and payments, and a summary of expenses subject to TDS. The assessee had asserted that tax was not deductible on this sum, which comprised numerous low-value transactions. Since the DRP did not specify under which section tax should have been deducted or paid, and the AO raised no adverse comments during remand proceedings, the disallowance was deemed lacking justification. The Tribunal directed the Assessing Officer to delete this disallowance. Regarding the TDS credit, both parties agreed to a review by the Assessing Officer, with an opportunity for the assessee to be heard. The Assessing Officer was directed to verify the credit and grant it, providing a hearing if the credit is less than claimed. Ground No. 1, being general, was dismissed as no arguments were advanced. The ratio is that disallowances under Section 40(a) require specific identification of the non-deductible nature of expenses and failure to deduct tax, and mere lack of detailed documentation, when other evidence suggests non-deductibility or low-value transactions, may not justify disallowance.

What were the issues?

1. Whether the disallowance of INR 32,69,18,269 under Section 40(a) of the Act, in respect of payments made to non-resident Associated Enterprises ('AEs') and non-AEs, is justified, considering the assessee's contention that these payments were for imports below the tax deduction threshold and not taxable in India as per the Act/DTAA. (Mixed law and fact) Assessee's Contention: The disallowance is unwarranted as the payments were for import of goods and related items, not exceeding the threshold for tax deduction. Adequate details were provided to the DRP and AO, and there was no lapse in submission. The DRP erred in not appreciating that such payments are not taxable in India. Revenue's Contention: The addition was warranted as the assessee had not provided the requisite details before the DRP. The DRP's decision was endorsed. 2. Whether the restriction of Tax Deducted at Source ('TDS') credit to INR 174,15,07,152 as against the claimed INR 206,60,65,815 is correct. (Mixed law and fact) Assessee's Contention: The AO erred in restricting the TDS credit. The assessee prayed for rectification or review by the AO. Revenue's Contention: Not recorded. Both parties agreed to a review by the AO.

Which sections of the Income-tax Act were involved?

Section 40(a),Section 143(3),Section 144C,Section 254,Section 10A,Section 10AA,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: BANGALORE

Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI KESHAV DUBEY

For Appellant: Shri Ajay Rotti, CA, Dr. Divya K. J – CIT

PER PRASHANT MAHARISHI, VICE – PRESIDENT

1.

This appeal is filed by M/s. IBM India Private Limited (Assessee/ Appellant) against the Assessment Order passed u/s. 143 (3) r.w.s. 144C (five) r.w.s. 254 of the Income Tax Act, 1961 (the Act) dated 28.03.2025 by the Deputy Commissioner of Income Tax, Circle 3 (1) (1), Bangalore (the learned Assessing Officer) for Assessment Year 2008 – 09 wherein the Assessee has raised following grounds of appeal: –

1.

Assessment order bad in law

1.1.

At the outset, M/s IBM India Private Limited (hereinafter referred to as 'the Appellant' or ‘the Company') prays that the order dated March 28, 2025, passed under section 143(3) read with section 144

The order continues below.

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