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2017 (3) TMI 476 - AT - Income TaxAddition u/s 14A - Held that:- In the present case, the shares are admittedly not held as stock-in-trade and, accordingly, yield dividend income or, in case of their transfer, capital gains, so that there is no scope for scaling down the disallowance u/s. 14A.In fact, the said reduction is only with reference to interest expenditure, direct or indirect, and not indirect, administrative expenditure, for which only disallowance stands made in the instant case, so that it would hold in any case (refer: Damani Estates & Finance (P.) Ltd. (2013 (8) TMI 457 - ITAT MUMBAI). The disallowance of impugned indirect, admissible expenditure under section 14A read with rule 8D (2) (iii) is, in view of the foregoing, apposite and upheld. We may, before parting, though clarify that we have based our decision on, apart from the clear language of the provision of sec. 14A read with rule 8D, the decisions in Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ), which itself draws on several by the Apex Court. In fact, we observe an inconsistency insofar as the tribunal directs non-invocation of s. 14A r/w r. 8D (2)(iii) in case of strategic investments - which would though need to be proved, while at the same time approving the application of r. 8D(2) (i)/(ii) in case of borrowed capital used for such investments. Either s. 14A applies or not so in respect of such investments. If the investment being strategic is a relevant consideration - which would require defining it as well as a finding in the matter, it would exclude application of s. 14A in whole, and not in part. Disallowance u/s. 14A, it needs to be appreciated, is only qua expenditure actually incurred and claimed in relation to such investments bearing tax exempt income, and there could be no disallowance in the absence of expenditure. Therefore, to say that one limb of the said rule shall not apply for the reason that the investment is strategic, as (say) for acquiring controlling interest, while upholding the other limb, may not be proper. Besides being incongruent with the law in the matter as explained by the higher courts of law as well as the larger benches of this tribunal, the premise is internally inconsistent. Admissibility of expenditure of Enterprise Resource Planning (ERP) software - revenue or capital expenditure - Held that:- Clearly, therefore, ERP is, functionally speaking, a tool, a part of the profitmaking apparatus, of the business, for enabling it’s management and operations in a manner not possible or feasible otherwise, improving productivity in short. The assessee has not placed any material on record at any stage to exhibit or substantiate its case, nor has in any manner rebutted the findings by the Revenue or impugned the reliance/s made by it. Its’ case thus rests on and is therefore no more than a bald statement of the expenditure yielding no enduring benefit, which being allied to the functional test, is precisely question that is to be determined. Rather, broadly speaking, we do not think there is much difference, i.e., conceptually or in principle, between the hardware (computer) and the software, which are two integral components of one composite computerized environment/system, working in unison for the purpose of the assessee’s business, so that regarding one as capital, merely because it is tangible, and the other as revenue, because it is not, may not be proper. Thus Enterprise Resource Planning (ERP) software installed by the assessee denied on the ground of it representing capital expenditure, inadmissible u/s. 37(1) of the Act
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