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TMI Blog2021 (8) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's current clientele include small and medium enterprises (SMEs) in pharmaceuticals, textiles, automotive parts and ancillary, information technology and steel sectors. For the assessment year under dispute, the assessee had entered into certain international transactions with its overseas Associated Enterprises (AE), FIM Business Solution Ltd., Malta. Precisely, the assessee paid an amount of Rs. 38,38,741/- as software lease expenses to the AE for leasing a software viz. Kastle Factoring System for a term of seven years, subject to, renewal for a period of one year at a time. As per the terms of the agreement, the AE would also provide software maintenance and support services, implementation and configuration service, customization services, technical consultancy and training services and disaster recovery services. He found that the assessee had benchmarked the transaction with the AE by applying "other method" as provided under rule 10AB. While doing so, assessee has relied upon quotations obtained from two independent software service providers viz. Aditya Birla Minacs IT Services and Viyana Software. Ultimately, the assessee had claimed the payment made for leasin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the agreement. These grounds are dismissed. 6. In ground no. 6, assessee has challenged the disallowance of software lease payment of Rs. 29,96,384/- under section 37(1) of the Income Tax Act, 1961. 7. Briefly the facts are, in course of assessment proceedings, the assessing officer (AO) called upon the assessee to prove that the software lease expenses were incurred wholly and exclusively for the purpose of business. Alleging that the assessee failed to furnish the required details and evidences to substantiate its claim, the AO disallowed the expenses. On the very same reasoning that the assessee did not produce documentary evidences to substantiate its claim, learned DRP also sustained the disallowance. 8. Learned counsel for the assessee submitted, the allegations of the departmental authorities that the assessee did not furnish the details and documentary evidences to substantiate its claim is baseless and not borne out from record. He submitted, not only before the AO but even before learned DRP, the assessee had furnished all the details relating to the software lease expenses. In this context, he drew our attention to the documentary evidences placed in the paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alleging that the assessee failed to furnish the details of referral expenses which supporting evidences to demonstrate that such expense was incurred wholly and exclusively for the purpose of business, the AO disallowed the expenses. Objection raised by the assessee challenging the aforesaid disallowance was also rejected by the learned DRP. 13. Learned counsel for the assessee submitted, the allegation of the departmental authorities that the assessee did not furnish documentary evidence to justify its claim is completely baseless and contrary to facts on record. Drawing our attention to referral agreement dated 01.02.2011 entered with Blend Financial Services Ltd., a copy of which at page 217 of the paper book, learned counsel submitted, the referral agreement was entered into for the growth of the assessee and entirely for its business interest. In this context, he drew our attention to various clauses of the agreement. Further, he submitted, in course of proceedings before the departmental authorities not only the referral agreement was furnished but various other documentary evidences including the list of clients referred by Blend Financial Services Ltd. and the income ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to furnish supporting evidence to demonstrate that the expenditure incurred is wholly and exclusively for the purpose of business is contrary to the facts on record. In view of the aforesaid, we delete the disallowance. This ground is allowed. 17. In ground nos. 8 and 9 assessee has challenged disallowance of Rs. 42,69,567/-, being expenditure incurred towards improvement of the lease hold premises. 18. Briefly the facts are, in course of assessment proceedings the AO noticed that the assessee has debited an amount of Rs. 42,69,567/- towards lease hold premise improvement expenses. Therefore, he called for the necessary details. In response to the query raised by the AO, the assessee furnished its explanation stating that the expenditure incurred mainly relate to interior work and installation of work station. However, the AO observed that the assessee did not submit the details of work carried out for which expenditure was incurred. Being of the view that the expenditure incurred is for future benefit from the existing asset and due to which capital value of the asset has increased, the AO treated the expenditure to be of capital nature and disallowed. Learned DRP also sus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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