TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 1502
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....owed the expenditure incurred towards communication expenses under provisions of Section 40(a)(ia) of the Act, irrespective of the fact that the payments were made for internet leased lines and such payment is not in the nature of royalty. 2.3 The third ground, the Ld. Assessing Officer disallowed the interest on advances provided to the subsidiaries/group companies for the business purpose under the provisions of Section 36(i)(iii) of the Act. 2.4 Last, The Ld. Assessing Officer has erred in disallowing software development expenditure paid to its subsidiary company Prodapt Corporation for non-deduction of TDS were the payments are made to the subsidiary for the services rendered outside India. 3. The brief facts of the case that the assessee company was incorporated under Companies Act and in existence for more than 12 years in software support services focusing on telecom segment and provides experience and innovation with state of the art processing technology and a solid reputation ensuring outstanding customized service to each clients and works with communication service providers, telecom solutions companies in providing software services and filed the Return of Income f....
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....tion 10A of the Act, and the present assessment year pertains to 10th year of claim, though the manufacturing or production has taken place on 21.09.1999, but the first year of claim being assessment year 2001-02. Therefore, the assessee has rightly claimed for the last year being the 10th year and the Revenue has accepted for the earlier years without any dispute. Further, the Ld. AR supported his arguments with the paper book with the details of Approval of STP, Annual reports and prayed for allowing the ground of the appeal. Contra, the Ld. DR relied the order of the lower authorities. 7. We heard the rival submissions and perused the material available on record and the paper book filed by the assessee in support of the claim for deduction under Section 10A of the Act. The sole crux of the issue lies on the date on which the production is actually commenced. For claiming exemption, the Ld. AR drew our attention to the paper book, where the assessee's company name was changed from earlier Zeetron Solutions Pvt. Ltd to present Prodapt Solutions Pvt. Ltd on 22.05.2000, and approval from Software Technology Park of India referred at page 2, explaining grant of approval on setting ....
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....ommunications. These companies would have paid tax on these amount, hence cannot be considered for disallowance under Section 40(a)(ia) of the Act and relied on Madras High Court judgment in Skycell Communications Ltd v Deputy Commissioner of Income Tax 119 Taxman 496 and prayed for allowing the appeal. Contra, the Ld. DR relied the orders of the lower authorities. 9. We heard the rival submissions, perused the material on record and on perusal of the assessment order, we found that the assessee has made a claim that the communication charges are paid to Indian companies M/s. Tata Communications & M/s. Reliance Communications, in respect of lease lines. But, there is no reference of any agreement for entrusting works between the assessee and said companies. The Assessing Officer assumed that this dedicated lease charges are on par with royalty. Whereas, we are unable to come to a conclusion on the nature of internet communication charges paid to these companies, as neither the assessee nor Revenue could put forth before us with evidence to state that this amount pertains to internet charges or towards the royalty. Hence, we are of the opinion, the matter has to be verified by the ....
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.... for rendering the business, whereas, the Ld. DRP found that the Assessing Officer has justified in his action as no evidence was filed by the assessee in respect of supporting the claim and confirmed the order of the Assessing Officer. 11. Before us, the Ld. AR argued that the Assessing Officer has disallowed the advances given by the assessee company to its subsidiary companies under Section 36(1)(iii) of the Act and were such advances are part of business considerations, and relied on the Hon'ble Supreme Court decision of SA Builders v. CIT in 288 ITR 1. The Ld. Assessing Officer found that one of the subsidiary has debit balance referred at page 4 of the assessment order pertaining to the Amounts receivable on account of sale of computers and furnitures in the year 2006 and therefore no interest was charged and this amount pertains to outstanding balance of sales. The Assessing Officer has not considered this fact inspite of providing the adequate information in the assessment proceedings. The transactions with the subsidiary companies are due to business exigencies and commercial expediency and prayed for allowing the ground. Contra the Ld. DR relied on the orders of the lowe....
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....wance made by the Assessing Officer on M/s. Prodapt Corporation Inc, USA, M/s. Prodapt Technology Holdings Pvt Ltd and M/s. Southern Group Industries Pvt. Ltd to the file of the Assessing Officer to verify and pass orders and the assessee should be provided opportunity of being heard before disposal of the order on merits. 13. The last ground, in the financial year 2009-10, the assessee has paid an amount of Rs.1.57 crores to M/s. Prodapt Corporation Inc, a subsidiary of the assessee's company towards software development. Contention of the Ld. Assessing Officer is that the assessee has not deducted TDS, whereas the assessee company has entered into service agreements with three clients in USA viz. Intrado, West Corporation and Pacific Crest Technology. But these services were rendered by the subsidiary company Prodapt Corporation Inc, USA to which the assessee company has made the payment of Rs.1.57 crores and the services to the subsidiary companies are not in the nature of technical services. Hence, no TDS was deducted. The Assessing Officer examined the service agreement with Pacific Crest Technology Inc and came to a conclusion based on the scope and terms of agreement, which....