AM International Holdings (India) Private Limited Vs ITO (ITAT Chennai)
Reimbursement to group concern held business expendituare- ITAT Chennai allows software expense claim
Assessee, engaged in management consultancy services to group entities including Tamil Nadu Petroproducts Ltd. (TPL), filed appeal against the order of CIT(A), NFAC, Delhi, confirming disallowance of software expenses of ₹60.94 lakh claimed u/s 37(1).
During assessment, AO disallowed the expenditure holding that the Assessee failed to furnish supporting bills, claiming that records were destroyed in the Chennai floods. AO also observed that the claim was abnormally high compared to the previous year’s ₹5.87 lakh. CIT(A) sustained the disallowance alleging inconsistency & lack of reconciliation of invoices.
Before the Tribunal, Assessee explained that it acted as an interface between TPL & Cherrytec Intellsolve Ltd., which had been engaged by TPL for providing SAP/ERP & IT support services under an agreement dated 24.09.2010. As the services of Cherrytec were unsatisfactory, the Assessee advised TPL to terminate the contract, which under clause 21 required payment of six months’ maintenance charges to Cherrytec. Since TPL made the termination payment on Assessee’s advice, it raised two invoices dated 01.03.2014 totaling ₹68.42 lakh on the Assessee, which reimbursed ₹39 lakh during FY 2013-14 & the balance later.
