DCIT CORPORATE CIRCLE 2 (2), CHENNAI V. M/S IFMR RURAL RURAL CHANNELS & SERVICES PVT LTD, CHENNAI

ITA 2679/CHNY/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4859 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-09-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 20-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N.VENKATRAMAN
• Keywords: Capital asset; Business expenditure; Wholly owned subsidiary; Revenue expenditure; Capital expenditure; TDS
• Section: 250; 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , . , % BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.2679/CHNY/2019 ( / ASSESSMENT YEAR:2015-16) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(2), 512, 5 TH FLOOR. WANAPARTHY BLOCK, CHENNAI-600 034. VS M/S. IFMR RURAL CHANNELS & SERVICES P.LTD. PHASE-I, 10 TH FLOOR, IITM RESEARCH PARK, KANAGAM VILLAGE, (BEHIND TIDEL PARK) TARAMANI, CHENNAI-600 113. PAN: AAFCR 4450D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. G.JOHNSON, ADDL.CIT /RESPONDENT BY : MR. N.VENKATRAMAN, C.A. ! /DATE OF HEARING : 07.09.2021 ! /DATE OF PRONOUNCEMENT : 29.09.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER PASSED BY THE LEARNED CIT(A)-6, CHENNAI DATED 05.0 6.2019 AND PERTAINS TO ASSESSMENT YEAR 2015-16. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE C ASE. 1. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW THE CL AIM OF RS.4,50,00,000/- TOWARDS TECHNOLOGY AND RESEARCH & DEVELOPMENT FEE TO IRFS BY HOLDING THAT THE SAME IS AN ELIGIBLE BUSINESS EXPENDITURE AS THE ASSESSEE IS US ING THE KGFS MODEL FRAMEWORK, VARIOUS SERVICES, SOFTWARE PERDIX ETC., WHICH IN TURN WERE USED FOR THE BUSINESS OF A SSESSEES SUBSIDIARY COMPANY. 2 ITA NO. 2679/CHNY/2019 2. CIT(A) OUGHT TO HAVE APPRECIATE THE FACT THAT TH E ADDITION WAS MADE BY AU AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS/RELEVANCE OF THE TECHNOLOGY AND RESEARC H & DEVELOPMENT FEES TO ITS GROUP CONCERN M/S IFMR RURA L FINANCIAL SERVICES PVT. LTD., 3. CIT(A) FAILED TO CONSIDER THE FACT THAT THE ASSE SSEE HAS NOT FURNISHED THE RELEVANT DETAILS ALONG WITH CORROBORA TIVE EVIDENCES EITHER AT THE TIME OF ASSESSMENT PROCEEDI NGS OR AT THE APPEAL PROCEEDINGS IN SUPPORT OF ITS CLAIM. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE M/S. I FMR RURAL CHANNELS & SERVICES PVT. LTD., BEING AN ENTITY WIT H A MISSION OF FINANCIAL INCLUSION BY GIVING FINANCIAL ACCESS T O REMOTE RURAL INDIA IS HAVING ABOUT 250 BRANCHES ACROSS THREE ST ATES OF TAMIL NADU, UTTARAKHAND AND ORISSA. IN ORDER TO SER VE PURPOSE, THE ASSESSEE HAS A TECHNOLOGY WITH COMPLETE INTEGR ATION OF CENTRAL ACCOUNTING SOFTWARE AND DATA IS PROCESSE D ON REAL TIME BASIS. M/S. IFMR RURAL FINANCE SERVICES PVT. L TD. IS A ORIGINATOR AND OWNER OF KGFS MODEL FRAMEWORK, A DIS TINCTIVE MODEL FOR PROVIDING FINANCIAL PRODUCTS / SERVICES, WHICH HAS BEEN DESIGNED AND DEVELOPED KEEPING IN MIND NEEDS OF UNDERSERVED SEGMENTS OF POPULATION OF VARIOUS GEOGR APHIC LOCATIONS. THE ASSESSEE HAS ENTERED INTO A FRAMEWO RK AGREEMENT WITH M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. DATED 28.01.2013 AND HAD AGREED TO AVAIL SERVICES OF IFMR RURAL FINANCIAL SERVICES PVT. LTD. ALONG WITH SOF TWARE CALLED 3 ITA NO. 2679/CHNY/2019 PERDIX FOR WHICH IT HAS AGREED TO PAY A SUM OF R S.3 CRORES TOWARDS TECHNOLOGY SERVICES AND FURTHER A SUM OF RS .1.5 CRORES TOWARDS PROFESSIONAL SERVICES. DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2015-16, THE ASSESSEE HAS PAID A SUM OF RS.4,50,00,000/- TO M/S. IFMR RURAL FINANCIAL SERV ICES PVT.LTD. AND DEBITED SAME INTO PROFIT & LOSS ACCOUN T UNDER THE HEAD TECHNOLOGY AND RESEARCH & DEVELOPMENT FEE. T HE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE AND ACCORDING TO HIM, THE ASSESSEE HAS FAILED TO ESTABLISH KIND OF TECHNO LOGY RECEIVED FROM M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. AND FURTHER THE ASSESSEE HAS NOT SUBSTANTIATED RELEVANCE OF EXP ENSES FOR RUNNING ITS DAY-TO-DAY OPERATIONS. FURTHER, IF AT ALL, EXPENSE IS INCURRED, SAME IS INCURRED FOR ACQUIRING TRADE MAR K ETC. AND HENCE, IT SHOULD BE CAPITALIZED. THEREFORE, HE OPIN ED THAT PAYMENT MADE TO M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. AMOUNTING TO RS.4,50,00,000/- IS NOT GENUINE AND HE NCE, DISALLOWED AND ADDED BACK TO TOTAL INCOME. THE RELE VANT FINDINGS OF THE ASSESSING OFFICER ARE AS UNDER:- 3.4 THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM OF TECHNOLOGY AND RESEARCH & DEVELOPMENT FEES PAID TO ITS SISTER CONCERN. THE ASSESSEE FAILED TO ESTABLISH TH E KIND OF CHNOLOGY RECEIVED AND HAS NOT SUBMITTED ANY MATERIA L EVIDENCE IN THIS REGARD. THE ASSESSEE HAS ONLY PROD UCED THE 4 ITA NO. 2679/CHNY/2019 LEDGER EXTRACT AND PAYMENT SCHEDULE MADE TO THE REL ATED PARTY IFMR RURAL FINANCIAL SERVICES PVT LTD THE ASS ESSEE HAS NOT SUBSTANTIATED THE RELEVANCE OF THE EXPENS E FOR RUNNING ITS DAY-TO-DAY OPERATIONS. THE NATURE OF SE RVICES PROVIDED BY THE RELATED PARTY IS AMBIGUOUS AND NOT SPECIFIC. IF AT ALL THE EXPENSE IS INCURRED FOR ACQUIRING TRADE- MARKS ETC THEN THE SAME SHOULD BE CAPITALIZED AND NOT CLAIMED AS REVENUE EXPENSE. THE ASSESSEE HAS ONLY MANAGED TO S HIFT ITS PROFITS TO THE RELATED PARTY BY CLAIMING TECHNOLOGY AND RESEARCH & DEVELOPMENT FEE EXPENDITURE. THUS IT IS AT BEST A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE FOR SHIFT ING PROFITS. 3.5 HENCE IT IS HELD THAT GENUINENESS/RELEVANCE OF THE TECHNOLOGY AND RESEARCH & DEVELOPMENT FEES EXPENSE CLAIMED BY THE ASSESSEE OF RS.4.50 CRORE IS NOT PRO VED. 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 HER EBY DISALLOWED AND BROUGHT TO TAX FOR THE FINANCIAL YEA R 2014-15 RELEVANT TO AY 2015-16. 4. BEING AGGRIEVED BY ASSESSMENT ORDER, THE ASSESSE E PREFERRED AN APPEAL BEFORE LEARNED CIT(A). BEFORE LEARNED CIT(A), THE ASSESSEE HAS FILED DETAILED WRITTEN SUB MISSIONS 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 INC URRED UNDER THE HEAD TECHNOLOGY SERVICES AND RESEARCH DE VELOPMENT FEE PAID TO M/S. IFMR RURAL FINANCIAL SERVICES PV T. LTD. IS GENUINE IN NATURE, WHICH WAS PAID FOR SERVICES RECE IVED BY THE ASSESSEE INCLUDING USING KGFS MODEL FRAMEWORK AND S OFTWARE TO RUN DAY TO DAY BUSINESS OF THE ASSESSEE. THE LE ARNED CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS OF T HE ASSESSEE 5 ITA NO. 2679/CHNY/2019 AND ALSO TAKEN NOTE OF VARIOUS FACTS HELD THAT TECH NOLOGY AND RESEARCH & DEVELOPMENT FEES PAID BY THE ASSESSEE T O M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. WAS FOR US ING KGFS MODEL FRAMEWORK, VARIOUS SERVICE, SOFTWARE PERDIX ETC., AND THUS, SAME BECOME ELIGIBLE FOR BUSINESS EXPENDITURE . THE RELEVANT FINDINGS OF THE LEARNED CIT(A) ARE AS UNDE R:- 4.1.2 1 HAVE CONSIDERED THE CONTENTS OF THE ASSES SMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE CAREFULLY . AS COULD BE SEEN FROM THE DETAILS AVAILABLE ON THE RECORDS, THE ASSESSEE COMPANY IS A 100% SUBSIDIARY OF MIS. IFMR HOLDINGS P LTD (OR THPL). THE ASSESSEE COMPANY, IN- TURN, HAS A 100% SUBSIDIARY COMPANY CALLED M/S. DVARA KSH ETRIYA GRAMEEN FINANCIAL SERVICES P LTD (OR DLCGFS). FURTH ER, IHPL ALSO HAS ANOTHER 100% SUBSIDIARY COMPANY IN THE NAM E AND STYLE OF M/S. IFMR RURAL FINANCIAL SERVICES P LTD ( OR IRFS). THE STRUCTURE IS - 6 ITA NO. 2679/CHNY/2019 4.1.3 THE WESSEE (IRCS) HAS FLOATED A. SUBSIDIARY COMPANY CALLED M/S. DVARU KSHETRIYA GRAMEEN FINANCIAL SERVI CES P LTD (OR, DKGFS), AS AN NBFC, TO DEAL IN THE BUSINESS OF RURAL FINANCE. HOWEVER, THE ASSESSEE COMPANY HAS THE ENTI RE INFRASTRUCTURE AND THE MANPOWER REQUIRED FOR DOING THE BUSINESS. IT HAS 221 BRANCHES ALL OVER THE STATES O F TN, ORISSA, UTTARAKHAND STATES, WHILE ITS SUBSIDIARY DK GFS HAS THE LICENSE OF NBFC. HENCE THE ASSESSEE LET OUT ITS INFRASTRUCTURE. INCLUDING THE 221 BRANCH PREMISES T AKEN ON LEASE, MANPOWER ETC TO DKGFS. DKOFS IS USING THESE INFRASTRUCTURE AND MANPOWER FOR RUNNING ITS BUSINES S OF FINANCING. THUS, FOR USING THE INFRASTRUCTURAL FACI LITIES AND MANPOWER, DKGPS S REQUIRED TO COMPENSATE TO THE ASS ESSEE COMPANY. FOR THIS PURPOSE, THE ASSESSEE IS RAISING MONTHLY INVOICES ON DKGFS, BY WAY OF ORIGINATION FEE. THE AMOUNT SO PAID IS CLAIMED AS EXPENDITURE IN THE BOOKS OF DKGF S, AND AS INCOME IN THE HOOKS OF THE ASSESSEE COMPANY. THIS I S THE BUSINESS MODEL OF THE ASSESSEE. 4.1.4 MEANWHILE, THE OTHER COMPANY M/S. IPMR RURAL FINANCIAL SERVICES P LTD (OR, IRFS) DEVELOPED KGFS MODEL FRAMEWORK, A DISTINCTIVE MODEL FOR PROVIDING FINANC IAL PRODUCTS/SERVICES, WHICH HAS BEEN DESIGNED AND DEVE LOPED KEEPING IN MIND THE NEEDS OF THE UNDERSERVED SEGMEN TS OF THE POPULATION OF VARIOUS GEOGRAPHIC LOCATIONS, SO AS TO MAXIMIZE THEIR FINANCIAL WELL-BEING. IN ADDITION TO LETTING THE KGFS TRADEMARK, IRFS IS ALSO OFFERING VARIOUS FIN ANCIAL PRODUCTS AND SERVICES, TO THE ASSESSEE AND ITS SUBS IDIARIES, INTER-ALIA, TECHNOLOGY, OPERATION MANUALS, INCUBATI ON SERVICES, PROFESSIONAL SERVICES, TRAINING TO EMPLOY EES OF THE ASSESSEE COMPANY AND ITS SUBSIDIARIES IN RELATION T O 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 SOFT WARE IS USEFUL FOR THE FINANCIAL BUSINESS OF THE ASSESSEES SUBSIDIARY COMPANY DKGFS. HOWEVER, AS DKGFS IS ALREADY FUNCTIO NING BY USING THE INFRASTRUCTURE AND MANPOWER OF THE ASS ESSEE COMPANY, FOR THE SAKE OF CONVENIENCE, IRFS LET OUR THE SOFTWARE TO THE ASSESSEE (BY LICENSING TO THE ASSES SEC). FOR ALL THESE SERVICES RECEIVED FROM IRFS, THE ASSESSE E COMPANY IS PAVING MONTHLY FEES. THE ASSESSEC COMPANY IN-TU RN, USING THE SERVICES ETC RECEIVED FROM IRFS, AND THE SOFTWA RE FOR THE 7 ITA NO. 2679/CHNY/2019 BUSINESS REQUIREMENTS OF ITS SUBSIDIARY COMPANY (DK GFS), ALONG WITH OTHER INFRASTRUCTURE AND MANPOWER. HENCE THE ASSESSEE COMPANY STARTED CHARGING DKGFS FOR USING T HE KGFS MODEL FRAMEWORK SERVICES, SOFTWARE, BY FACTO RING THE SAID KGPS MODEL FRAMEWORK SERVICES, SOFTWARE LICEN SING CHARGES, ETC , PAID TO IRPS INTO THE ORIGINATION FEE CHARGED FROM DKGPS. 4.1.5 THUS, THE TECHNOLOGY AND RESEARCH & DEVEL OPMENT FEE OF RS.4,50,00,000/- PAID TO IRFS IS FOR THE US E OF KGFS MODEL FRAMEWORK, VARIOUS SERVICES, SOFTWARE PERDIX ETC., WHICH IN TURN, WERE USED FOR THE BUSINESS OF THE AS SESSEES SUBSIDIARY COMPANY (DKGFS). HENCE THE TECHNOLOGY A ND RESEARCH & DEVELOPMENT FEE PAID AMOUNTS TO BUSINES S EXPENDITURE IN THE HANDS OF THE ASSESSEE COMPANY, A S THE KGFS MODEL FRAMEWORK, VARIOUS SERVICES, SOFTWARE PERDIX ETC. HAVE ALSO BEEN USED AND ITS COST HAS BEEN FACT ORED INTO, WHILE CHARGING THE ORIGINATION FEE FROM ITS SUBSI DIARY COMPANY (DKGFS). THEREFORE THE TECHNOLOGY AND RESE ARCH & DEVELOPMENT FEE OF RS.4,50,00,000/- PAID TO IRFS IS AN ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSESSEE. 4.1.6 THE NEXT OBSERVATION OF THE ASSESSING OFFICER IS THAT THE ABOVE PAYMENT OL RS.4,50,00,000/- TO IRFS COULD FOR ACQUIRING TRADE MARK, WHERE THE EXPENSES WILL BE OF CAPITAL IN NATURE, THIS OBSERVATION IS NOT CORRECT. YES, LICENSING FEE PAID WILL AMOUNT TO A CAPITAL EXPENDITURE FOR ACQUIRING AN I NTANGIBLE ASSET, IF IT WAS A LUMP-SUM AND/OR ONETIME CONSIDE RATION. HOWEVER, IN THE PRESENT CASE, PAYMENT (CONSIDERATIO N) IS ON MONTHLY BASIS. HENCE THE PAYMENT IS NOT FOR ACQUIRI NG ANY CAPITAL ASSET / LICENSE. IT WAS A MONTHLY PAYMENT F OR USING THE KGFS MODEL FRAMEWORK, VARIOUS SERVICES, SOFTWARE P ERDIX ETC. THEREFORE, THE PAYMENT BECOMES A REVENUE EXPEN DITURE AND ELIGIBLE FOR DEDUCTION WHILE COMPUTING THE TAXA BLE INCOME. 4.1.7 IN VIEW OF THE ABOVE REASONS, I AM OF THE OPI NION THAT THE TECHNOLOGY AND RESEARCH & DEVELOPMENT FEE OF RS.4,50,00,000/- PAID BY THE ASSESSEE TO IRFS, WAS FOR USING THE KGFS MODEL FRAMEWORK, VARIOUS SERVICES, SOFTW ARE PERDIX ETC AND ACCORDINGLY BECOMES AN ELIGIBLE BUSI NESS EXPENDITURE. THEREFORE, THE ASSESSING OFFICER IS DI RECTED TO ALLOW THE ASSESSEES CLAIM. THE ASSESSEE SUCCEEDS I N ITS APPEALS IN THIS REGARD. 8 ITA NO. 2679/CHNY/2019 5. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS ERRED IN DELETING ADDITIONS MADE BY THE ASSESSING O FFICER TOWARDS DISALLOWANCE OF TECHNOLOGY AND RESEARCH & DEVELOPMENT FEES PAID BY THE ASSESSEE TO M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD., WITHOUT APPRECIATING FACT THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS/ RELEVANCE 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 CORROBORATIV E 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 T HAT IT IS A MATTER OF FACT THAT ASSESSING OFFICER HAS NOT DISPU TED GENUINENESS OF PAYMENT, BUT WHAT WAS QUESTIONED IS RELEVANCE OF INCURRING SAID EXPENDITURE, EVEN THOUGH THE ASS ESSEE HAS DEMONSTRATED WITH NECESSARY EVIDENCES THAT IT HAS AVAILED SERVICE FROM M/S. IFMR RURAL FINANCIAL SERVICES PV T. LTD. AND THEIR KGFS MODEL FRAMEWORK SOFTWARE WHICH IS VERY N ECESSARY FOR THE PURPOSE OF BUSINESS OF ASSESSEE. IN ADDITIO N, THE 9 ITA NO. 2679/CHNY/2019 ASSESSEE HAS ALSO USED SOFTWARE DEVELOPED BY M/S. I FMR 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 EVIDE NCES, INCLUDING PAYMENT BY CHEQUE AFTER DEDUCTING NECESSA RY TDS AS APPLICABLE AS PER LAW. THEREFORE, THE LEARNED CIT( A), AFTER APPRISING NECESSARY FACTS HAS RIGHTLY HELD THAT EX PENDITURE INCURRED UNDER THE HEAD TECHNOLOGY AND RESEARCH & DEVELOPMENT FEES IS REVENUE IN NATURE, WHICH IS DE DUCTIBLE. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. THE FACTS BORNE OUT FROM RECORDS INDICATE TH AT THE ASSESSEE IS IN THE BUSINESS OF EXTENDING FINANCIAL ASSISTANCE TO RURAL PEOPLE HAD AVAILED TECHNOLOGY AND PROFESSIONA L SERVICES FROM ITS GROUP COMPANY M/S. IFMR RURAL FINANCIAL S ERVICES PVT. LTD. AND PAID TECHNOLOGY FEES OF RS.3 CRORES A ND PROFESSIONAL CHARGES OF RS.1.5 CRORES FOR THE IMPU GNED ASSESSMENT YEAR. WE FURTHER NOTED THAT THE ASSESSE E IS ALSO USING KGFS TRADEMARK, WHICH IS OWNED BY M/S. IFMR R URAL FINANCIAL SERVICES PVT. LTD. ALONG WITH VARIOUS FI NANCIAL PRODUCTS / SERVICES WHICH INCLUDE TECHNOLOGY OPERAT ION MANUAL, 10 ITA NO. 2679/CHNY/2019 INCUBATION SERVICES, PROFESSIONAL SERVICES AND TRAI NING TO EMPLOYEES OF THE ASSESSEE COMPANY. THE ASSESSEE IS ALSO USING SOFTWARE CALLED PERDIX DEVELOPED BY M/S. IF MR RURAL FINANCIAL SERVICES PVT. LTD. WHICH IS USEFUL IN FI NANCIAL BUSINESS AND BANKING ETC. AS EXPLAINED BY THE ASSES SEE, THIS SOFTWARE IS USEFUL FOR FINANCIAL BUSINESS OF THE A SSESSEE SUBSIDIARY COMPANY M/S. DKGFS SINCE DKGFS IS ALREAD Y FUNCTIONING BY USING INFRASTRUCTURE AND MANPOWER O F THE ASSESSEE COMPANY FOR WHICH THE ASSESSEE HAS CHARGE D TO ITS SUBSIDIARY, FOR THE SAKE OF CONVENIENCE, M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. HAS LET OUT SOFTWARE TO THE ASSESSEE. THE ASSESSEE COMPANY IN TURN IS USING SE RVICES ETC. RECEIVED FROM M/S. IFMR RURAL FINANCIAL SERVICES P VT. LTD. AND FURTHER, SOFTWARE DEVELOPED BY THEM FOR BUSINESS RE QUIREMENTS OF ITS SUBSIDIARY COMPANY ALONG WITH OTHER INFRAST RUCTURE AND MANPOWER FOR WHICH ASSESSEE COMPANY IS CHARGING DKG FS FOR USING KFGS MODEL FRAMEWORK, VARIOUS SERVICES AND SO FTWARE BY FACTORING CHARGES PAID TO SAID KFGS MODEL FRAMEW ORK, SOFTWARE LICENSING CHARGES ETC. TO M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. FOR ALL THESE SERVICES RECEIVED FROM M/S. IRFS, THE ASSESSEE COMPANY IS PAYING MONTHLY FEES. 11 ITA NO. 2679/CHNY/2019 THEREFORE, FROM THE ABOVE, IT IS VERY CLEAR THAT PA YMENT MADE BY THE ASSESSEE TO IRFS TOWARDS TECHNOLOGY SERVICE S AND PROFESSIONAL SERVICES FOR USING KFGS MODEL FRAMEWOR K, VARIOUS SERVICES, SOFTWARE PERDIX ETC. WHICH IN TURN WERE USED FOR THE BUSINESS OF THE ASSESSEE SUBSIDIARY COMPANY, IS IN THE NATURE OF BUSINESS EXPENDITURE IN THE HANDS OF ASSESSEE CO MPANY. FURTHER, IT IS NOT A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT JUSTIFIED PAYMENT FOR SAID SERV ICES TO ITS GROUP COMPANIES. THE ASSESSING OFFICER HAD ALSO NOT DOUBTED GENUINENESS OF TRANSACTION, BUT HE HAD QUESTIONED N ECESSITY FOR INCURRING SAID EXPENDITURE. IT IS WELL SETTLED POSI TION OF LAW THAT ASSESSING OFFICER CANNOT SIT IN ARMCHAIR OF BUSINE SSMAN AND QUESTION RELEVANCE AND NECESSITY OF INCURRING ANY P ARTICULAR EXPENDITURE. FURTHER, HE CANNOT GO INTO ANALYSIS OF COST BENEFIT FROM A PARTICULAR EXPENDITURE. BUT, WHAT IS REQUIRE D 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, EXPENDITUR E INCURRED BY THE ASSESSEE TOWARDS PAYMENT MADE TO GROUP COMPANIE S FOR TECHNOLOGY AND RESEARCH & DEVELOPMENT FEES IS SUPPO RTED BY 12 ITA NO. 2679/CHNY/2019 AN AGREEMENT BETWEEN THE PARTIES, WHICH CLEARLY LAY S DOWN NATURE OF SERVICES AND TECHNOLOGY AVAILED BY THE AS SESSEE. THE ASSESSEE HAD ALSO MADE PAYMENT BY CHEQUE AFTER DEDU CTING APPLICABLE TDS AS PER LAW. FROM THE ABOVE, IT IS VE RY CLEAR THAT THERE IS NO DOUBT ABOUT GENUINENESS OF PAYMENT AND RENDERING OF SERVICES BY SERVICE PROVIDER. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT EXPENDITURE INCURRED BY THE AS SESSEE TOWARDS PAYMENT MADE TO M/S. IFMR RURAL FINANCIAL SERVICES PVT. LTD. FOR AVAILING SERVICES AND USING THEIR TRA DEMARK, INCLUDING SOFTWARE PERDIX ETC. IS IN THE NATURE OF REVENUE EXPENDITURE, WHICH WAS INCURRED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. WE FURTHER NOT ED THAT SAID EXPENDITURE IS NOT CAPITAL IN NATURE, BECAUSE THE A SSESSEE HAS NOT ACQUIRED ANY TECHNICAL KNOW-HOW OR ASSET, BUT W HAT WAS RECEIVED FROM SERVICE PROVIDER WAS TECHNOLOGY SUPP ORT SERVICES AND PROFESSIONAL SERVICES FOR MANAGING DA Y-TO-DAY BUSINESS AFFAIRS OF THE ASSESSEE. THEREFORE, SAID E XPENDITURE CANNOT BE CONSIDERED AS CAPITAL IN NATURE. THE LEAR NED CIT(A), AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETE D ADDITIONS MADE BY THE ASSESSING OFFICER. HENCE, WE ARE INCLIN ED TO 13 ITA NO. 2679/CHNY/2019 UPHOLD ORDER OF THE LEARNED CIT(A) AND DISMISS APPE AL FILED BY THE REVENUE. 8. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) ( G. MANJUNATHA ) % ' / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER % /CHENNAI, * /DATED 29 TH SEPTEMBER, 2021 DS ,- .- /COPY TO: 1. APPELLANT 2. RESPONDENT 3. / () /CIT(A) 4. / /CIT 5. - 3 /DR 6. /GF .