What are the tax implications for B3D due to the non-deduction of TDS on payments made to Pathway Consulting GMBH? Additionally, is there any…

It deducted the tax at source but failed to deposit to the Government. Later, it deposited the TDS with the Government in December 2025. Disallowance of Expense under Section 40(a) (i) - As per Section 40(a) (i) of the Income Tax Act, 1961, if an assessee deducted tax at source (TDS) on payment of fees for technical services to a non-resident but failed to pay the same on or before due date of filing return of income, then such expenditure shall be disallowed in the previous year. As per the first proviso to Section 40(a) (i) , if tax has been deducted during the previous year but paid after due date of filing return of income, then the expense will be allowed in the year in which such tax is paid. In the given case, since BharatTech3D (B3D) deducted tax but did not deposit it on or before the due date, the fees for technical services of 25lakhs will be disallowed while computing business income for the Financial Year 2024-25 (A.Y. 2025-26). Since tax is paid in December 2025, the expense of 25lakhs will be allowed as a deduction in the Financial Year 2025-26 (A.Y. 2026-27). Determination of TDS Amount :- As per Section 195, any person responsible for paying interest (other than interest referred to in section 194LB or section 194LC) or any other sum chargeable to tax (other than salaries) to a non-corporate non-resident or to a foreign company is liable to deduct tax at source at the rates in force. Applicable rate of tax on such FTS is 20%. However, if DTAA provides for a rate lower than 20%, then, provisions of DTAA would apply. The applicable TDS rate (assuming it qualifies as "fees for technical services" and DTAA benefit is considered) shall be 10% + surcharge (if applicable) + 4% cess. TDS @10% on 25,00,000 = 2,50,000 HEC @4% on 2,50,000 = 10,000 So, the total TDS Amount shall be - 2,60,000 Interest Calculation under Section 201(1A) :- Section 201(1A) imposes interest on delayed TDS payment as follows: Interest for Delay in Deposit (1.5% per month or part thereof) TDS was deducted on 31st December 2024 but deposited in December 2025 Delay = 12 months Interest = 1.5% per month × 12 months × ₹ 2,60,000 Interest = 46,800