9911796707
TMI Blog2021 (10) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... t the addition was made by AU as the assessee failed to prove the genuineness/relevance of the Technology and Research & Development fees to its group concern M/s. IFMR Rural Financial services Pvt. Ltd., 3. CIT(A) failed to consider the fact that the assessee has not furnished the relevant details along with corroborative evidences either at the time of assessment proceedings or at the appeal proceedings in support of its claim." 3. Brief facts of the case are that assessee M/s. IFMR Rural Channels & Services Pvt. Ltd., being an entity with a mission of financial inclusion by giving financial access to remote rural India is having about 250 branches across three States of Tamil Nadu, Uttarakhand and Orissa. In order to serve purpose, the assessee has a technology with complete integration of central accounting software and data is processed on real time basis. M/s. IFMR Rural Finance Services Pvt. Ltd. is a originator and owner of KGFS model framework, a distinctive model for providing financial products/services, which has been designed and developed keeping in mind needs of underserved segments of population of various geographic locations. The assessee has entered into a fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 4.50 crore is not proved. The same is to be disallowed while computing the income chargeable under the, head 'business or profession'. The Technology and Research & Development fees of Rs. 4,50,00,000/- paid by the assessee to its group concern M/s. IFMR Rural Financial Services Pvt. Ltd. is hereby disallowed and brought to tax for the financial year 2014-15 relevant to A.Y. 2015-16." 4. Being aggrieved by assessment order, the assessee preferred an appeal before learned CIT(A). Before learned CIT(A), the assessee has filed detailed written submissions which has been reproduced at para 4.1.1 on page 4 to 6 of the CIT(A) order. The sum & substance of the arguments of the assessee before the CIT(A) was that expenditure incurred under the head 'technology services and research development fee' paid to M/s. IFMR Rural Financial Services Pvt. Ltd. is genuine in nature, which was paid for services received by the assessee including using KGFS Model framework and software to run day to day business of the assessee. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of various facts held that technology and research & de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Operation Manuals, Incubation Services, Professional Services, training to employees of the assessee company and its subsidiaries in relation to said financial products/services and other back and support services on a continuous basis. Further, IRFS also developed a software, called 'PERDIX' useful in the financial business, banking etc. As explained by the assessee, his software is useful for the financial business of the assessee's subsidiary company DKGFS. However, as DKGFS is already functioning by using the infrastructure and manpower of the assessee company, for the sake of convenience, IRFS let our the software to the assessee (by licensing to the assessee). For all these services received from IRFS, the assessee company is paving monthly fees. The assessee company in-turn, using the services etc received from IRFS, and the software for the business requirements of its subsidiary company (DKGFS), along with other infrastructure and manpower. Hence the assessee company started charging DKGFS for using the 'KGFS' Model framework services, software, by factoring the said KGPS' Model framework services, software licensing charges, etc. paid to IRPS int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of technology and research & development fees paid to its group concern. The DR further submitted that the assessee has not furnished relevant details along with corroborative evidence either at the time of assessment proceedings or at appellate proceedings to support its claim. 6. The learned A.R. for the assessee, on the other hand, supporting order of the learned CIT(A), submitted that it is a matter of fact that Assessing Officer has not disputed genuineness of payment, but what was questioned is relevance of incurring said expenditure, even though the assessee has demonstrated with necessary evidences that it has availed service from M/s. IFMR Rural Financial Services Pvt. Ltd. and their KGFS Model framework software which is very necessary for the purpose of business of assessee. In addition, the assessee has also used software developed by M/s. IFMR Rural Financial Services Pvt. Ltd. for which it has paid technology service fee and professional charges and the same is supported by necessary agreement and other evidences, including payment by cheque after deducting necessary TDS as applicable as per law. Therefore, the learned CIT(A), after apprising necessary facts has ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of business expenditure in the hands of assessee company. Further, it is not a case of the Assessing Officer that the assessee has not justified payment for said services to its group companies. The Assessing Officer had also not doubted genuineness of transaction, but he had questioned necessity for incurring said expenditure. It is well settled position of law that Assessing Officer cannot sit in armchair of businessman and question relevance and necessity of incurring any particular expenditure. Further, he cannot go into analysis of cost benefit from a particular expenditure. But, what is required to be seen is expenditure incurred by the assessee is genuine which is supported by necessary evidences and further, such expenditure was incurred wholly and exclusively for purpose of business of the assessee. In this case, expenditure incurred by the assessee towards payment made to group companies for technology and research & development fees is supported by an agreement between the parties, which clearly lays down nature of services and technology availed by the assessee. The assessee had also made payment by cheque after deducting applicable TDS as per law. From the above, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
