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TMI Blog2018 (4) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... g such services was not in the nature of technical services governed by section 194J - Decided in favour of assessee Disallowance of net enhancement and customization expenses (after allowing depreciation at the rate of 60%) - Held that:- As per our considered view, as technology keeps evolving, no enduring benefit arises and thus payments made for application software are revenue in nature. No merit for the disallowance of net enhancement and customization expenses.- Decided in favour of assessee Disallowance of net repairs and maintenance expenses after allowing depreciation at the rate of 10% - Held that:- After going through the nature of expenditure incurred on repairs and maintenance, we found that same is revenue in nature. No merit for the disallowance so made by the AO on account of repairs and maintenance. Disallowance made on account of lease rent expenses - Held that:- The issue is squarely covered by the order of the Tribunal in assessee’s own case for the A.Y.2010-11 as held at by following AS-19 the assessee has complied with the provisions of the Act, that AS-19 provides that in case of operating leases, the lease rent payment has to be treated as an allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid to various telecom service providers. As per the AO, the assessee should have deducted tax at source from the said DATA link charges under section 194J of the Act. The plea of the assessee before the AO was that the DATA link charges were not in the nature of fee for technical services but for allowing the satellite link line from one service provider to be carried over to the other service provider, that the existing service provider had to provide inter connection of their net works from equipment of net works to equipment of other service providers to provide subscribers efficient and flawless services,that the DATA link usage was only for transmission of data from the server of assessee to the designated client server, that it was obvious that through the process of interconnection one service provider would establishes a link between it s own network, services and equipment with the network, services and equipment of other service provider, that for facilitating these arrangements, service provider only uses the network element (for carrying the lines to their destination)of other service provider, that by providing the interconnection, the interconnection provider does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether such providing of services is covered under section 194J of the Act being technical or professional services provided by the service provider. XXXXXXXXXXXXXXXXXX 25. Now coming to the facts and circumstances of the present case, the assessee had furnished the explanation before the Assessing Officer and also filed written submissions before the CIT(A) vide letter dated 01.04.2013 along with Flow chart / Diagram of how the DATA links works which is placed at pages 24 to 26 of the Paper Book. The assessee also placed on record the sample copies of purchase orders at pages 27 onwards under which, it was explained that the perusal of the bills would reflect the basis of charges, rates, etc. which were fixed / agreed upon and finally billed by the DATA link providers and it was vehemently stated that the same does in no way indicate involvement or otherwise of human intervention in the DATA link process. In view thereof, in the absence of any human intervention between the assessee and the services provided by the DATA link provider, it cannot be said that the payment made by the assessee was for technical services. Merely because for maintenance purpose certain huma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature. For this purpose, reliance may be placed on the following judicial pronouncements:- CIT v. Raychem RPG Ltd. (346 ITR UNHM-HM ) CIT v. Geoffrey Manners Co. Lid. (226 Taxman135) (Bom.) CIT v. UHDE India (P.) Ltd. (224 Taxman 137(Bom.) Amway India Enterprises v. Dy. CIT ( 111 ITD 112(Del Trib) (SB) affirmed in n CIT v. Amway India Enterprises (346 ITR 341(Del HC ') CIT v. Voith Paper Fabrics India Ltd. (.346 ITR 70)(P H) CIT v. Asahi India Safety Glass Ltd. (203 Taxman 277) (Delhi HC) CIT v. Varinder Agro Chemicals Lid. (309 ITR 272) (P H) 11. In the following judicial pronouncements, it has been held that updation / modification for improving the operational efficiency are revenue in nature. CIT v. Raychem RPG Ltd. (346 ITR 138) (Bom.) Amway India Enterprises v. Dy. CIT (111 ITD 112 (Del Trib) (SB) affirmed in CIT v. Amway India Enterprises (346 ITR 341 ) (Del HC) CIT v, N. J. Invest ((P.) Ltd. (215 Taxnmn 78)(Guj) ACIT v. Sanghvi Savla Stock Brokers Ltd.(152 ITD 820) (Mum.) ACIT v. M/s. Maersk India Pvt. Ltd (ITA No.3072/Mum/2013) Clariant Chemicals (I) Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarely covered by the order of the Tribunal in assessee s own case for the A.Y.2010-11, the order dated 19/02/2016, observation of the Tribunal was as under:- 9.We find that the AO had made the disallowance as he was of the opinion that it was a prepaid expense and that it could not be claimed during the year under appeal, that the assessee had claimed the expenditure as per the provisions of AS-19, that the agreement entered into by the assessee was in the nature of operating lease as defined in AS-19, as per the accounting standard in such cases the payments have to be considered as an item of P L account on a straight line basis over the lease period. The FAA had given a categorical finding of fact that the provision of ₹ 1.08 crores was in respect of the liability that had accrued during the FY 2009-10.We are of the opinion that, by following AS-19 the assessee has complied with the provisions of the Act, that AS-19 provides that in case of operating leases, the lease rent payment has to be treated as an allowable expenditure. Therefore, in our opinion, the order of the FAA does not require any interference from our side. As a result, appeal filed by the AO stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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