24 August 2011
If the cost is pure reimbursement for expense incurred on Indian subsidiary's behalf, then TDS is not required.
However, from the fact of the case it appears that the holding company is charging on an adhoc basis. This could be a kind of Royalty. Hence, WHT u/s 195 would be mandatory in addition to Serivce tax u/s 66 A of Fin Act.
25 August 2011
I agree that it shall be better to deduct TDS as that may be classified as Equipment Royalty.
However :- Who controls the server? Whether Parent Company can use the server as per its terms or thats a standard facility availed by Parent Co. from Foreign Company?
These questions can change the face of whole situation.