Deletion of Disallowance Relating to Software Development

The Chennai Bench of the Income Tax Appellate Tribunal in ACIT v. Karunya Educational and Research Trust dismissed the Revenue’s appeal challenging deletion of disallowance relating to software development and maintenance charges paid by the assessee trust. 

The Tribunal reaffirmed its earlier findings rendered in the assessee’s own cases for preceding assessment years and held that the software development arrangements involving True Friends Management Support Service Pvt. Ltd. (TFMSS) and PW Data Solutions, UK (PWDS) constituted genuine commercial transactions supported by actual services. 

The ruling extensively discusses evidentiary standards in tax proceedings, admissibility of statements recorded without cross-examination, forensic analysis reports, transfer of funds allegations, and the distinction between suspicion and legally sustainable evidence.