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TMI Blog2012 (12) TMI 787X X X X Extracts X X X X X X X X Extracts X X X X ..... on and establishing telecom services and allied activities, including mobile and cellular services. Pursuant to its main object it leased to M/s. Bharti Telenet certain plant and machinery. Bharti Telenet had obtained licence for the purpose of providing cellular services in Himachal Pradesh. The lease arrangement entered into between the assessee and Bharti Telenet was scrutinized. The assessing officer noticed that the cost of plant and machinery given on lease by the assessee was Rs.10,57,25,094/- which was reflected in the balance sheet of the assessee under the head "plant and machinery given on lease". That apart the assessee had incurred an expenditure to the tune of Rs.1,35,05,869/- towards installation of these plant and machinery; in addition to it had incurred a sum of Rs.2,69,35,669/- towards software expenses. The assessee claimed the installation expenses as a deduction, debiting it to the profit and loss account. The software expenses on the other hand were treated in the accounts as deferred revenue expenditure and a sum of Rs.15,05,446/- was written off in the previous order. In the computation of income accompanying the return the software expenses of Rs.2,69,35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement and conduct of the assessee‟s business to be carried on more efficiently or more profitably white leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future." 4. Learned counsel emphasised and highlighted the fact that expenditure incurred in this case was one-time and at the site of the lessee which was an important aspect that escaped the notice of both the authorities below. It was urged that at the end of the lease period the equipment had to be dismantled and it had to be reassembled and such expenditure had to be spent time and again and it properly fell in the revenue and not in the capital field. Learned counsel for the revenue resisted the submissions and stated that no substantial question of law arises and that the expenditure incurred for installation of the plant and machinery was intrinsically connected with the plant and machinery. The counsel in other words stated that the machinery was incapable of use without being installed. The installation cost, therefore was part of "actual cost" that went into the setting up of the machinery and in turn had to be treated as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s particularly the Tribunal were influenced by the consideration that a composite amount was charged for such software in the lease arrangement. It was submitted that whether such charges were an integral part of financing should not obscure the real nature of the software for which again the test is whether it would fall in the revenue filed. Counsel in this regard relied upon the license agreement entered between the assessee and M/s. UB Vest (Usha Bethron Ltd.) whereby the latter agreed to license its software. The assessee‟s claim was noticed by the Tribunal who extracted it in the following terms: - "The hardware equipment supplied by Erricson are BSCs (Base Station Control) and MSC (Master Station Control). The BSCs comprises of towers and call receiving and recording equipments, whereas MSC comprises of equipments controlling the BSCs. These are the primary equipments for managing the cellular services in the region of Himachal Pradesh. The software required for updating and accounting of cellular phone calls is independent of the functioning of hardware equipments. In absence of the software acquired, a large number of manpower would have been deployed to monitor ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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. This Court finds no reason to differ from the Tribunal; there is certainly no reason to interfere with the Tribunal and accordingly the second question is answered in favour of the revenue and against the assessee. 9. The third question which the assessee sought to urge is with regard to the amount of Rs.2,33,76,761/- which it had claimed to write off as bad debt and alternatively as a business loss. The submissions in this regard were that the assessee was also engaged in the business of lending money through inter-corporate deposits in the course of such business which generated substantial interest during the assessment years. Certain amounts could not be recovered and were treated as bad debt. The assessee wrote off the unrecoverable amount and claimed it to be treated as bad debt. 10. Counsel for the assessee had urged that the Tribunal fell into error in holding that the memorandum of asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation of the company and it cannot be said that it was a continuous activity carried out in a normal organized manner. As held by the assessing officer, 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) read with section 36(2) of the Act. The alternative claim of the assessee that 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. The sum in question has, therefore, to be considered as a capital loss and the assessee was not entitled to claim the same as deduction. It may also be mentioned here that everything associated or connected with the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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