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ITAT Declares Disallowance Invalid After VSVS Settlement
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Income Tax Appellate Tribunaltax

ITAT Declares Disallowance Invalid After VSVS Settlement

May 29, 2026

The ITAT ruled that disallowances under Section 40(a)(i) cannot stand if corresponding income has been settled under the Vivad se Vishwas Scheme (VSVS).

ITAT Declares Disallowance Invalid After VSVS Settlement

The ITAT recently held that any disallowance under Section 40(a)(i) of the Income Tax Act is invalid if the corresponding income has already been settled under the Vivad se Vishwas Scheme (VSVS). This decision emphasizes the principle that concurrent resolutions of income and deductions must be aligned.

The Tribunal, while delivering the judgment, referenced the provisions of the VSVS which were designed to encourage ongoing dispute resolution. The ruling suggests a synchronized approach to tax treatment between income recognition and associated deductions.

This decision highlights the importance of maintaining thorough records of settled incomes and deductions, significantly impacting the advisory roles that legal practitioners play in guiding clients through such schemes.

Citations

  • ITAT (2026) Tax Case Report
Practice Areas:tax

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