TMI Blog2020 (11) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by that person. This product is produced by the AE of the assessee company and not by the assessee company and therefore, the amount payable by the assessee company to its AE in this regard is nothing but purchase price of the computer software and various judgments followed by the lower authorities are applicable and simply because specific detailed Distribution Agreement is not executed between the assessee company and its AE, it cannot be said that these judgments are not applicable when the understanding between the assessee company and its AE is similar. Assessee company obtains the purchase order from the Indian Customers in respect of certain IT Monitoring Software Products of Kaseya International Limited, Jersey as per agreed price for which the assessee company is acting as a distributor for distributing keys of such software. Under these facts, in our considered opinion, the arrangement of the assessee company with its AE is of purchase of computer software at agreed price i.e. sale price to the Indian customers minus margin of the assessee company equal to 15% of cost as specified in letter dated 03.01.2009 although we have seen that actually, it is 15% of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only payment made after retaining the intermediary margin and not for purchase of software . 4. We find that this additional ground is not signed by the assessee but it is signed by the learned AR of the assessee only and moreover, it is seen that this ground is nothing but an additional argument in support of the grounds already raised and therefore, we hold that it is not admissible as an additional ground but we will consider it as an argument while deciding the main grounds raised by the assessee. 3. In course of hearing, learned AR of the assessee submitted that the AO in para 3.1 of the assessment order has noted that the assessee company has filed letter dated 29.12.2015 in reply to the queries raised by the AO and has reproduced this letter in the same para of the assessment order. He pointed out that as per para 1 2 of the said letter dated 29.12.2015 reproduced by the AO, this was the submission of the assessee that the assessee company is only a distributor of the products and enables the transaction and the assessee does not purchase any software from KIL directly. He pointed out that in the same letter, this is further pointed out by the assessee that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court rendered in the case of Synopsis International Ltd. Vs. CIT as reported in 28 Taxman.com 162 was also noted by the AO. He further pointed out that in the same para, a tribunal order rendered in the case of M/s Kalki Communication Technologies Limited vs. ITO in ITA Nos. 1401 to 1403/B/2013 dated 15.04.2015 was also noted by the AO and by following these judicial pronouncements, the AO held that deduction is not allowable in respect of ₹ 213,03,772/- and he disallowed the same u/s 40 (a) (ia). He submitted that in the present case, the facts are different because there is no Distribution Agreement between the assessee company and its AE and therefore, none of these judicial pronouncements is applicable in the present case. 5. As against this, learned DR of the revenue supported the orders of the lower authorities and placed reliance on the judgment of Hon ble Karnataka High Court rendered in the case of CIT vs. Samsung Electronics Co. Ltd. (Supra). He also pointed out that in para 3.1 of the assessment order, it is noted by the AO that the assessee has purchased licences for two computer software i.e. Virtual System Administrative (VSA) ₹ 161,20,135/- and Subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no purchase of software and therefore, this argument is rejected because it has no merit. 8. The main issue in dispute is this as to whether this amount of ₹ 213,03,772/- debited by the assessee company to its P L Account as Software expenses is purchase of software by the assessee company or it is mere reimbursement by the assessee company to its AE being the cost incurred by the AE after retaining 15% of cost incurred by the AE. In this regard, we reproduce the contents of the letter dated 03.01.2009 from page 28 of the paper book. It reads as under:- This is to confirm that Kaseya International Limited (KIL) is the licensed owner of the software product Kaseya VSA . Kaseya Software India Private Limited (KSIPL) a wholly owned subsidiary of KIL has been authorized to sell the product Kaseya VSA within the geographical territory of India at a margin of 15% retained by KSIPL on the cost. KSIPL is also entrusted with the scope of advertising and marketing the product by organising and conducting events, exhibitions, seminars, sponsorship, etc. To achieve the selling and marketing objective KIL undertakes to reimburse all expenses incurred by KSIPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this activity but there is no such disclosure in the audited accounts and no such detail is made available to us. In respect of reimbursement of other expenses such as Advertisement, Travelling and Travelling related expenses, Business Promotion Expenses, Communication Expenses, Marketing Expenses, public relation cost, seminar and sponsorship expenses etc, we find that there is debit of ₹ 437,954/- on account of travelling expenses, ₹ 23,23,698/- on account of Conveyance Charges which is travelling related expenses, ₹ 15,93,322/- on account of Communication Charges and there is no clarification that these are after reimbursement. Hence, it is not established that the contents of letter date 03.01.2009 are being acted upon. 9. We also feel that even if it is being acted upon, these conditions of this letter about reimbursement of various expenses to the assessee company by its AE such as Salary including Directors Remuneration, Advertisement, Travelling and travelling related expenses, Business Promotion Expenses, Communication Expenses, Marketing Expenses, public relation cost, seminar and sponsorship expenses etc. will also not alter the nature of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products of Kaseya International Limited. The appellant, Kaseya India, obtains a Purchase Order from the Indian customers and raises a purchase request on Kaseya International Limited, Jersey as per the agreed price. 10. As per this para of SOF, it comes out that the assessee company obtains the purchase order from the Indian Customers in respect of certain IT Monitoring Software Products of Kaseya International Limited, Jersey as per agreed price for which the assessee company is acting as a distributor for distributing keys of such software. Under these facts, in our considered opinion, the arrangement of the assessee company with its AE is of purchase of computer software at agreed price i.e. sale price to the Indian customers minus margin of the assessee company equal to 15% of cost as specified in letter dated 03.01.2009 available on page 28 of the paper book although we have seen that actually, it is 15% of the purchase price paid by the assessee company to its AE.. 11. In view of the above discussion, we have no hesitation in holding that this fact that the assessee company is a distributor does not change the nature of the transaction and it is still a purchase as a ..... 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