TMI Blog2015 (11) TMI 1893X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s business more efficiently and more profitable. Thus, they have to be treated as revenue expenditure. TDS u/s 195 - disallowance being the provision made for the expenditure to be reimbursed in connection with the software allocation cost by the foreign AE/group company, Mindshare Asia Pacific - AO observed that, such a payment on account of reimbursement of software cost amounts to royalty within the meaning of Explanation to section 9(1)(vi) and TDS should have been deducted by the assessee while making the payment - assessee contended that it is merely reimbursement of cost of software expenses incurred by the Group company which has been allotted to the assessee and is not a Royalty within the meaning of Explanation 2 to Section 9(1)(vi) - HELD THAT:- These softwares have not been developed by the Parent Company or any AE, but have been centrally procured so that same can be allotted and given to the various Group entities in order to ensure proper functioning; proper coordination and quality. Whatever cost had been incurred for procuring the software from third parties has been allocated among the group entities on the proportionate basis. Such an allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of the business, various information and knowledge on different subjects relating to clients business, products, kind of markets in different parts of the country and also the information and knowledge about the different source of media like, newspapers, publications, Magazines, electronic media such as TV, internet etc. are required. This information was available from softwares supplied by different parties who specialize in such jobs and activities. The software has a very limited utility and useful life, due to vast changing of business dynamics and also the advancement of various kinds of requirements. The software generally has a useful life of 12 months to 18 months; therefore such expenditure is to be allowed as revenue expenditure. However, AO rejected the assessee s contention and disallowed the following software expenditures debited to the profit and loss account which according to the AO was in the nature of license fees and research cost :- Sr. No. Particulars Amount (Rs.) 1 Software License Cost of MAC(MS Office) 2,38,386 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO observed that, such a payment on account of reimbursement of software cost amounts to royalty within the meaning of Explanation to section 9(1)(vi). Accordingly, he held that TDS should have been deducted by the assessee while making the payment, which has not been done and therefore, disallowance u/s 40(a)(i) has been made. The Ld. CIT(A) too has confirmed the said addition on the following reasons :- The amount paid towards purchase of Software is Royalty as held in the case of CIT (Int.Tax) vs Samsung Electronics Co. Ltd 320 ITR 209 (Mum). The appellant has produced the bills of Mindshare Asia Pacific have not been produced to prove that what Mindshare Asia Pacific have not been produced to prove that what Mindshare Asia Pacific has changed is merely the reimbursement of actual software cost. Without prejudice the amount has been paid towards purchase of software either directly or through intermediary does not matter. Hence provisions of sec. 194J were clearly applicable . 7. Before us, the Ld. Counsel contended that it is merely reimbursement of cost of software expenses incurred by the Group company which has been allotted to the assessee and is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been supplied by the AE/ group company, Mindshare Asia Pacific, the details of which are as under :- Sr. No. Particulars Amount(Rs.) 1 Postini/Symantec Antivirus and IBM Lotus Notes 18,39,000 2 Symantec support Maintenance 82,583 3 Treesize Professional License 6,706 4 Peersync Workstation Maintenance 6,37,523 5 Checkpoint SecureClient 2,29,442 6 Checkpoint SecureClinet Maintenance 97,104 7 MS Office EA 27,16,380 8 Timesheet 2,70,900 9 SA for SQL- METIS 1,35,584 10 Directory Maintenance for SharePoint 27,360 11 Windows Server CAL Renewal 1,57, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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