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2012 (12) TMI 787 - HC - Income TaxInstallation expenditure - Revenue v/s Capital - Held that:- This Court recalls the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1974 (10) TMI 3 - SUPREME COURT] that whether an expenditure necessary to bring an asset into existence and to put it in working condition was capital or revenue - The test “all expenditure necessary to bring such aspects into existence and to put them in a working condition” is a determinative test for installation and other charges needed to effectuate the working condition of the leased equipment. In this case clearly the authorities have applied the test and held the expenditure in question (Rs.1,35,05,869/-) to be properly falling in the capital field. No reason to differ with them - in favour of the revenue. Software expenses - Revenue v/s Capital - Held that:- The Tribunal had the benefit of considering all the documents which included the lease agreement with Bharti Telenet and the license agreement dated 11.11.1996 whereby the assessee secured license to exploit the software, provided it procured hardware as per agreed specification and also complied with order by the lessor UB Vest. The software as well as hardware were made an integral part of the arrangement. The software apparently caters to the hardware. In this case, it is necessary for the kind of software to cater to diverse activities such as billing regarding user and analyzing such like activities to promote speed and efficiency. That the parties chose to have a composite arrangement is one factor which the Tribunal was entitled to take into consideration. The Tribunal in our opinion correctly held that the test to discern whether the expenditure incurred by the assessee in this regard was capital or revenue did not in any manner differ from the content or character which were applicable while considering issue No.1 - no reason to differ from the Tribunal - in favour of the revenue. Write off as bad debt as a business loss - Held that:- As held by Tribunal MOA & AOA shows sufficiently the intention of the assessee to pursue certain main objects. The frequency of the activity is sought to be highlighted as giving rise to a continuous and organized activity. As held by AO the main activity of the assessee company was the business of promoting, establishing telecom services. By no stretch of imagination can it be said that the assessee was engaged in the business of money lending. Since the business of the assessee was not that of money lending, it cannot be said that the sum in question represents money lent in the ordinary course of the business of money lending carried on by the assessee. Therefore, the claim of the assessee did not fall within the parameters of provisions of section 36(1)(vii) r.w.s. 36(2). The sum in question should be allowed as a deduction as a business loss cannot also be accepted, since the sum in question was not incurred as expenditure in the ordinary course of business of the assessee - as decided in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME COURT] inter-corporate deposit was not a trade debt or part of any money-lending business - no error in the findings by the Tribunal on this - in favour of Revenue.
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