Network access charges are not software expenditure & are revenue in nature
The assessee has made the payment for availing e-mail infrastructure, which is owned by the parent company. It is using this e-mail infrastructure facilities for communication between its employees and outside business partners. Such facilities of secured internet facilities facilitates the day-to-day business operation of the assessee and does not bring into existence any enduring benefit or creation of a new asset to the assessee. It is not a capital software expenditure as held by the Assessing Officer even though the same has been classified under the head ‘software expenditure’. Such an expenditure is purely revenue in nature and is allowable under section 37(1).
No Transfer Pricing Addition For Notional Interest On Delayed Payments –
After carefully considering the rival submissions and the orders of the TPO as well as the direction of the DRP, we find that the assessee has no interest liability and it does not have any external borrowings. Even if the payments have been made by the A.E. beyond the normal credit period, there is no interest cost to the assessee. Moreover, there is no such agreement whereby interest is to be charged on such a delayed payment. From the summary of payment submitted by the learned Counsel, it is seen that the billing is done on quarterly basis and, accordingly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, on the facts and circumstances of the case, we are of the opinion that addition an account of notional interest relating to alleged delayed payment in collection of receivables from the A.Es, is uncalled for on the facts of the present case and is, accordingly, deleted.
Source- Evonik Degussa India (P.) Ltd. versus Assistant Commissioner of Income-tax (ITAT Mumbai) , IT Appeal No. 7653 (Mum.) of 2011, Dated- November 21, 2012