Ita/1656/2010 Of Bharti Televentures v. Joint Commissioner Of Income Tax

$-12 & 13 13IN THE HIGTI COURT OI.' DELIII A'I' NEW DELIIIIN THE HIGTI COURT OI.' DELIII A'I' NEW DELIII Dtua of'tlectston; 18'h December, 2012 + ITA 1395/2006+ ITA 1656/2010+ ITA 1656/2010 M/S BFIARTI TELEVENTURES t.l'l) AppcllantThrough N'Ir Kaanan Kapoor, Advocate \,OTSUS ADDL /JT COMMISSIONER OIi INCONII,TAX RespondentThrough IVIs Suruclu Agganval. Sr Standing Counsel CORAM:MR. JUSTICE S. RAVINDRA I}IIA'IMR. JUSTICE R.V. EASWAIT S. RAVINDRA BHAT. J: [(OPEN ]COtllt'I') Thc present appeals are dircctcd against a common order of Income TaxAppellate Tribunal dated 10 03.2006 in cross-appeals filed before the l'ribunal l'hcquestions of law sought to be urged are - (t) Whelher lhe Tnbunul ./all rrtlo crror tn holdrng lhalil,35,05,869 - parcl b.), tlrc.I.!.!r'.\5'cs cts tnstallalion expendrlureby the assessee was coptt.tl ttt ttulitra and has lo be lrealed assu ch i n usse s.vnte n l proce e d t t t g.\')il,35,05,869 - parcl b.), tlrc.I.!.!r'.\5'cs cts tnstallalion expendrlureby the assessee was coptt.tl ttt ttulitra and has lo be lrealed assu ch i n usse s.vnte n l proce e d t t t g.\') ftr) Ll/hether lhe lribuncrl/cll rttr., arror til hol&ng lhat lhe sofltt,areexpenses lo lhe exlant of I,69,35,669,- rrtcun'ecl by lhe as.se.s.secv'ere captlal rn nalure')expenses lo lhe exlant of I,69,35,669,- rrtcun'ecl by lhe as.se.s.secv'ere captlal rn nalure') (iii) Whelher lhe [ribunal wus.ltrsti/ied itt cfusollov,ittg the nght of ullthe sunt of Q,33,76,671 - crore.s us becldcbt has bustness lo.ts?"the sunt of Q,33,76,671 - crore.s us becldcbt has bustness lo.ts?" 2 2 The assessee inter alia engagcs itsclf in thc promotion and establishing telecomservices and allied activities, including mobilc and cellular services. Pursuant to itsmain object it leased to M/s l-]harti ['l'clcnct ]certain plant and machinery llharti I]'n 1 395/2006 &. 165612t0 Page I ol'10 Signature Not Verified Telenet had obtained [licence ][for ][the ][purpose ][of ][providing cellular ][services ][tn]Himachal Pradesh. The lease arrangemcnt [cntcred ][into ][between ][the ][assessee and]Bharti Telenet was scrutinized. ['t'he asscssing ][olliccr ][noticed that the ][cost ][of ][plant ][and]machinery given on lease by the [assessec ][was ][{10,57,25,094/- which ][was ][reflected in]the balance sheet of the [assessee ][under ][thc ][head ]["plant ][and ][machinery ][given ][on ][lease"']That apart the assessee [had incurred ][an ][expcttciiturc ][to ][the ][tune ][of ][{1,35,05,8691-]towards installation [of ][these ][plant ][and ][machittcry, ][in ][addition ][to ][it ][had ][incurred ][a sum]of {2,69,35 ,6691- towards [software ][expcnscs ]['l'he ][assessee ][claimed ][the ][installation]expenses as a deduction, [debiting ][it ][to ][thc ][profit ][and loss ][account ][The ][software]expenses on the other [hand ][were ][treatcd ][in ][thc ][accounts ][as ][deferred ][revenue]expenditure and a [sum ][of ][{15,05,446l- ][was ][rvrittett ][off ][in ][the previous ][order. ][In ][the]of [income ][accompanying ][tilc ][return ][the ][software ][expenses ][of]computation <2.69,35,6691- were claimed [as ][a ][cicduction ]['l'hc ][asscssing ][officer ][disallowed ][both]these amounts. The [assessee ][carried the tttattcr uttsucocssfully ][in ][appeal. ][As ][far ][as ][the]first issue i.e. installation [expenses ][wcrc conccrnod. ]['I ][hc ][CI't ][(Appeals) confirmed ][the]assessing offrcer's [order holding that ][the c.xpontliture ][fell ][properly ][in ][the capital field.]The Tribunal confirmed [the ][same] 3 Learned counsel for [the ][appellant urgcs ][that thc ][expenditure ][on installation ][of]<1,35,05,869/- did not [confer ][any capital ][aiivantage He ][argued ][that ][since ][no]enduring benefit [ensued ][as ][a ][rcsult ][of ][this expcndituro ][and ][a ][separate lease ][rental ][was]obtained from the [IWs. ][Bharti 'Ielcnct, ][thc expcnditure towards installation ][had ][to ][be]considered in the [light ][of ][the ][clccisions ][which iaid ][down ][the ][test ][as ][to ][whether]commercially, they [conferrcd any ][aclvantagc ][ln ][support ][of ][the ][submissions ][learned]counsel relied upon [the ][decisions o1'tho Sul)funrc ][Court rcported ][as ][CI|'v. ][Assouated]C.ement Company [Ltd. ][(1988) ][172 ][t'Ili.257 ][(SC) ][r.r'hereitr ][the ][Supreme ][Court ][held ][as]-under. rLA 1 395/2006 &. [16561210] " ...tntrffe of the advattage til tt cotiltttcrt'tctl [sense ][ond ][ft ][ts ][only ][u'here]the atlvantage ts [in ][the ][iapnat ]ftelcl [thtrt ][the ][expendrlure ][would ][be]drsallov,able on [qn ][apltlrcatton ][of ][lhrs ][lesl. ][If ][the ][advantage ][cortsisls]merely irt facilrtating [the ][(Isss.ssce ]['s lrucfung ][operultotts ][or ][enablmg ][the]monogement [and cincltrct ][of ][the ][(l.trs.t.tsc".r ][Dlts2re'ss ][to ][be ][carrred ][on]moreeffecttvell,()rmoreprofitubh,lrhi|elcqvtngthefixedc?pila!utttouchetl, the [expenditure v"ttrtld be ][tttt ][rcr:eiltte ][accttttttt, ][even ][though]lhe [atlvanlage ][ntay ][endurefor ][un tnclefrmte./itlure'"] counsel [also ][relicd ][upon ][thc decision ][in ][l:mprre Jute Co' ][Ltd' ][v' ][CI'1.']Similarly (1980)124ITRl(SC)whereintheCourtheldasfollows- ,,There may, be coses where expuultltrre, eyail tJ' tncurred for obtanungof [endurutg ][bene.fit, ][ttlu-1':, ][ttone-lhe-less, ][be ][ott ][rev'enue,]ath,anlage, crcco,,t arill'the [te1 ][;f ][endurtrry ][bene.ftl ][t,uS' ][break ][dov'rt' ][Il ][ts ][lttl]everl cuivatilage [of ertitrrntg ][naltrre crctyttrctl ][b1' ][urt ][ds"te'tse't ][thal ][bnngs]the case wthrTt [thl ][prmcipie ][tcrul ][clovri ][ttt ][tltts ][tesl' ][Whal ][rc ][ntalenal lo]cortsuler tS the [tntt)re ][of'fhe atlt'ct,luge ][til ][u ][commeraql ][sense ][and ][tl ][ts]onl1, [yrTrp ][the ][advanlage ][ts ][irt ][the ][c'ttlttttrl ][Jieltl ][that ][the ][expendrture]t+,oultl be drsallov'able [on att ][appltc'ttlir-ttt ][of ][tht's ][lest' ][If ][the advantage]cottsisls merely [in ]facfulatrng [tlrc ][c7.sre.t.tsc's ][trading ][operations or]etwblittg [the ][niaragentenl antl ][c'ttrulrrc'l ][rt/'tlrc ][l;'ssessee's ][buvness ][lo ][be]car.rred ott more [efficientty ][or ][nlor,: ][prrtlitubll'v'hrle ][leat'ing ][the ][fixed]cupilal ntouched, [lhe ][expencltlure ][votrlcl ][ba otr revettue Qccouttl, ][eyetl]thotrgh lhe advantuge [nrcr)'enclttre ]Jor [utr ][;ndqfinrlefulure'"]of [endurutg ][bene.fit, ][ttlu-1':, ][ttone-lhe-less, ][be ][ott ][rev'enue,]ath,anlage, crcco,,t arill'the [te1 ][;f ][endurtrry ][bene.ftl ][t,uS' ][break ][dov'rt' ][Il ][ts ][lttl]everl cuivatilage [of ertitrrntg ][naltrre crctyttrctl ][b1' ][urt ][ds"te'tse't ][thal ][bnngs]the case wthrTt [thl ][prmcipie ][tcrul ][clovri ][ttt ][tltts ][tesl' ][Whal ][rc ][ntalenal lo]cortsuler tS the [tntt)re ][of'fhe atlt'ct,luge ][til ][u ][commeraql ][sense ][and ][tl ][ts]onl1, [yrTrp ][the ][advanlage ][ts ][irt ][the ][c'ttlttttrl ][Jieltl ][that ][the ][expendrture]t+,oultl be drsallov'able [on att ][appltc'ttlir-ttt ][of ][tht's ][lest' ][If ][the advantage]cottsisls merely [in ]facfulatrng [tlrc ][c7.sre.t.tsc's ][trading ][operations or]etwblittg [the ][niaragentenl antl ][c'ttrulrrc'l ][rt/'tlrc ][l;'ssessee's ][buvness ][lo ][be]car.rred ott more [efficientty ][or ][nlor,: ][prrtlitubll'v'hrle ][leat'ing ][the ][fixed]cupilal ntouched, [lhe ][expencltlure ][votrlcl ][ba otr revettue Qccouttl, ][eyetl]thotrgh lhe advantuge [nrcr)'enclttre ]Jor [utr ][;ndqfinrlefulure'"] 4 Learned counsel [emphasised and ][highlightcd ][the ][fact that ][expenditure incurred]in this case [was one-time ][and ][at the sitc o1'thc ][lcssce ][which ][was ][an ][important ][aspect]that escaped [the notice ][of ][both thc authoritics ][below ][It ][was ][urged that ][at ][the ][end ][of]the lease [period the ][equipment ][had ][to ][be disrttantlcd and ][it ][had ][to ][be ][reassembled ][and]such expenditure [had ][to ][be ][spent ][time ][artcl ][again ][and ][it ][propcrly ][fell ][in ][the revenue ][and]not in the capital [field ][Learned counscl ][for ][thc ][rcvenue resisted ][the ][submissions ][and]stated that [no ][substantial question ][of ][law ][ariscs and ][that the expenditure incurred ][for]installation of the [plant ][and machinery ][r.r'as ][irltrinsically ][connected ][with ][the plant ][and]machinery. [The ][counsel ][in ][other ][words ][statecl ][lhat ][the machinery was incapable ][of ][use] rfA I 395/2006 & [16561210] without being installed The installation cost, thcrefore was part of "actual cost" thatwent into the setting up of the machincry and in turn had to be treated as capitalexpenditure. Therefore, it was rightly disallowcd by the lower authorities. 5 This Court has considered thc submissions made on behalf of the assessee.The test of "enduring benefit" which was pcrceivcd as the true and applicable test tojudge whether an expenditure fell in capital ticld has becn, over the years, consideredas a self-limiting one. The Courts havc hcld that a proper approach has to be adoptedand in doing so the nature of the advantagc in a cornmercial sense and whether it fallsproperly in the capital freld in a conirncroial sensc has to be considered (referjudgment of Associatecl Oement Cotnpanrcs Ltd. and Empire Jule Co. Ltd., etc ) In thepresent extent, however, this Court recalls the [judgment ]of the Supreme Court inChallapalli Sugars Ltd. v. [(:17-,(1975) ]98 l1'l{ 167 ['l'hc ]Courtthere had occasiontoconsiderwhetheranexpenditurenecessarytObtiug-an-as_$9L!!@in working condition wqi_qap{al _e_r tetygt}ut: ['I'he ][(lourt ]held that expenditurenecessary to bring into existence and to put thc lrsscts in a working condition would becapital in nature. In case money is borrowed by a ncwly started company, the interestincurred prior to the commencing of procluction would be part of the actual cost of theplant and machinery. It was noted that thc accepted rule of accountancy fordetermining the cost of fixed asscts is to includc all expenditure necessary to bringsuch assets into existence and put them irr working condition. f'herefore, the test ["all]expendrture necessary to bring .urch usltccts ittlo cxr.slence and to put lhem in aworkmg condttrcn" is a determinativc tcst lbr irrstailation and other charges needed toeffectuate the working condition of thc leased ecluipmcnt In this case clearly theauthorities have applied the test and hcld tho cxpenditurc in cluestion [({1,35,05,869/-)]to be properly falling in the capital licld \A/c scc no rcason to differ with them. TheTribunal's reasoning is unexceptionablc lts order necds no interference and the first substantial [question ][of ][law ][is ][answercd ][in ][fayour ][of ][the ][revenue ][and ][against ][the]assessee substantial [question ][of ][law ][is ][answercd ][in ][fayour ][of ][the ][revenue ][and ][against ][the]assessee 6 The Second issue [concerns ][softw'are cxpellses ][to ][the tune ][of ][<2,69,35,6691-']The assessee's contention [herein ][is ][that ][1[is ][was ][a ][pre-design software ][and ][not]customized to suit [its ][particular ][rcquirements ][Learned ][counsel highlighted ][the ][fact]that the lower [authorities ][particularly ][thc ][-l'ribunal ][were ][influenced ][by ][the]consideration that a [composite amount was chargcd ][for ][such software ][in ][the ][lease]lt [was ][submitted ][that whcther ][such ][charges ][were an integral part ][of]arrangement financing should [not ][obscure the real nature ][ot'thc ][software ][for which ][again ][the test ][is]whether it would fall [in ][the ][revenue ][filed ][(lounsel ][in ][this ][regard ][relied ][upon ][the]license agreement entered [between ][thc ][asscssee ][and ][N{/s ] [Vest ][(Usha ][Bethron]Ltd ) whereby the [latter ][agreed ][to ][licensc ][its ][software ][The ][assessee's ][claim ][was]noticed by the [Tribunal who ][extracted ][it ][in ][thc ][lbllowing ][terms ][-] "The haruJware equPmettt '\ttpplted [b1t ][['r'v'"on ][are ]'BSCs [(Base]Statiott Control) [ana ][tutsC ][(lvlu.ster ][S'tcttrrttr ][Control)' ][T'he ][BSC's]comprtses of towers and [chll ][receit'tttg ][turd recordtng ][equqmenls,]v,hereas MSC conpnses [oJ ][equry)mettt.\ ][cottlrutllrng ][the ][BSCs. ][T-hese]are the prtmary [equip,nenls ]for [tntuutgtrry ][lhe ][callular ][services ][in ][the]regrcn of Hmachal [Pradesh.] The software requrrecl.for [uptlcrttttg ][cuul ][accotttttrng ][of ][cellular]phone calls rs independenl [of ][llrc.fitttctrrtrtrrtg ][of ][hurdw'are ][equryment's']In absence of [the ][sofhvare ][ocrpttretl, ][u ][lurge ][ntmtber ][of ][ntanpov'er]"been would have deptoyett lrt [nu;nttot' ][cuch ][IJSCs ][and ][MSCs' ]['l'hrs]w,oupl hqv,e resultedin [ietal:ert ][tnforrtttrtrttns,.fttr ][accowtling ][and ][hlltng]of cellular .servtces. the software suppltetl [b1' ][l,,rric's\tt ][Y'as ][lo ][carry ][out ][lhe]followmg futtct [t ][orts ][: ][-] (t) collect oriltne [rrtfortrtutt,tr tn regard ][to ][cDlls ][ft.e. ][(-.all]delection records) [at ][BS(':] (i, Compiling of the [('/)/is ]orthrrc at MSC in regard to CDHouse received at each IJSC. 'I'he scfiv,are suppltedfi'om I/|) l,'c.st, Ccrlcufta, are requiredfor.funclrcning [of ][online ][rafing ][of' ][thc ]CDlls [collect ]from MSC andfinanual [accotnttirtg ][o/' ][the ][compat ]ry. On accrnmt of bemg tndclterr{ant nalure to the equipment,Erricsort have rarsed separate bill.s/itr s'ofrv,are supplrcd. The softwareare independent of the hardware ecluipmertts /iutclrcning and relates tofinancrul [accortnti ][ng and ][b ][i ] [i ][ng."] 7 After the submissions were nradc and tirc inipugned order was passed, theappellant apparently moved a miscellaneous application for correction/ rectificationwhich was allowed by thc Tribunal but rvrthout any changc in the result. The assesseeunderlined the fact that the software lcasc was not an intcgral part of the lease It wassubmitted that the Tribunal despite the rcctitlcation did not reverse the order Counselhighlighted the fact that the software in this casc was general and only modified in alimited manner to suit the end user It r.'u'as urged that the software had no pecuniaryfeatures so as to cater to the hardware that lii d bcen lcased to IWs. Bharti Telenet. Thecounsel, therefore, submitted that to treat thc cxpenditure incurred by the assessee inthis regard as capital in nature was error]oorrs 7 After the submissions were nradc and tirc inipugned order was passed, theappellant apparently moved a miscellaneous application for correction/ rectificationwhich was allowed by thc Tribunal but rvrthout any changc in the result. The assesseeunderlined the fact that the software lcasc was not an intcgral part of the lease It wassubmitted that the Tribunal despite the rcctitlcation did not reverse the order Counselhighlighted the fact that the software in this casc was general and only modified in alimited manner to suit the end user It r.'u'as urged that the software had no pecuniaryfeatures so as to cater to the hardware that lii d bcen lcased to IWs. Bharti Telenet. Thecounsel, therefore, submitted that to treat thc cxpenditure incurred by the assessee inthis regard as capital in nature was error]oorrs 8. This Court noticcs that the lower autlrr-tritics and the'l'ribunal had the benefit ofconsidering all the documents which irrolucicd thc lease agreement with Bharti Telenetand the license agreement dated I 1 I I i 996 whcreby thc assessee secured license toexploit the software, providcd it procurccl har dwarc as per agreed specification andalso complied with order by the lessor tJll Vest ['l'he ]software as well as hardwarewere made an integral part of the arrangcrncnt I'he software apparently caters to thehardware. In this case, it is neccssary lbr thc kind of software to cater to diverseactivities such as billing regarding user ancl :rnaiyzing such like activities to promotespeed and efficiency. l'hat the parties chosc ro havc a composite arrangement is one ITA 1395/2006 & 1656t210 factor which the Tribunal [was ][entitlcd to ][take ][into ][considcration ][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 ][revenuc ][did ][not ][in ][any ][manner ][differ ][from ][the]content or character [which ][were applicable ][rvhile considering ][issue ][No.i. ][This ][Court]finds no reason to differ [from ][the Tribunal, ][there ][is certainly no ][reason ][to ][interfere]with the Tribunal [and accordingly ][the ][second cluestion ][is ][answered ][in ][favour ][of ][the]revenue and against [the ][assessee.] 9 The third question which [the ][assessec ][sought ][to ][urge ][is with ][regard ][to ][the]amount of [t2.33,76,7611- ][which ][it ][had ][clairncd ][to ][write ][off ][as bad debt ][and]alternatively as a business [loss ][The ][subrnissions ][in ][this ][regard were that the ][assessee]was also engaged inthe business [of ][lending ][ntoncy ][through ][inter-corporate deposits ][in]the course of such [business ][which ][generatcd substantial interest ][during ][the ][assessment]years Certain amounts [could not ][be ][rccor,'ercd and ][were treated ][as ][bad ][debt ][The]assessee wrote offthe [unrecoverable arnount ][and ][claimed ][it ][to ][be ][treated ][as ][bad debt] l0 Counsel for the [assessee ][had ][urgcd tirat ][thc'Iribunal fell ][into ][error ][in ][holding]that the memorandum [of ][association ][of ][the ][assessee ][could ][not ][bind the ][income ][tax]authorities which [had ][to ][discern ][what ][was ][its ][rcal ][and ][true ][business ][Counsel]emphasised the [fact ][that the ][term "business" is ][rvidc ][I-Ie ][relied ][upon the decisions in]Krrshtn [prasad ]& [Co. ][Ltd. ][r,. ][CIL', ][(1955) 27 ][t'l'lt ][.19 ][(SC), ][C1f v. ][Tamrl ][Nadu ][Dqtrv']Developmertt Corporation [Ltd., ][(1955) ][216 ][l'l'R ][535 ][(Mad ), ][wherein the Madras ][High]Court held as under' [-] l0 Counsel for the [assessee ][had ][urgcd tirat ][thc'Iribunal fell ][into ][error ][in ][holding]that the memorandum [of ][association ][of ][the ][assessee ][could ][not ][bind the ][income ][tax]authorities which [had ][to ][discern ][what ][was ][its ][rcal ][and ][true ][business ][Counsel]emphasised the [fact ][that the ][term "business" is ][rvidc ][I-Ie ][relied ][upon the decisions in]Krrshtn [prasad ]& [Co. ][Ltd. ][r,. ][CIL', ][(1955) 27 ][t'l'lt ][.19 ][(SC), ][C1f v. ][Tamrl ][Nadu ][Dqtrv']Developmertt Corporation [Ltd., ][(1955) ][216 ][l'l'R ][535 ][(Mad ), ][wherein the Madras ][High]Court held as under' [-] ,,The term [,business' ]ts q vortl oJ' t'ers' wrtle, lhough by no meansdeterntrrnte, scope. It [has ][rightl1.,beett ][obsert'etl ][itr ][judrcialdeusnn's ][of]hrgh atrthonty rhat it rs [nerlher ][prttcttccrltle ][nr.tr ][tlesirable ][to ][tnake any]oitrnrpt at di-tmitrng [lhe ][anrbtl ][ttJ tl.s ][c'rtttttrtlcrltort. ][Each ][case ][has ][lo ][be]deteritmetl [u,ilh ][reference ][lo ][lhc ][pctt'trc'ular ][krnd ][of ][actrvtty ][cuul]of [the ][prrtoil ][concertratJ. 'l'lmtgh ][ordmanly ]['business']occttpatron ,rrpin, a cortttrttrous [aclivtlT' ][ttt ][cur,tng ][ott ][a ][particular ][trade ][or]deterntrrnte, scope. It [has ][rightl1.,beett ][obsert'etl ][itr ][judrcialdeusnn's ][of]hrgh atrthonty rhat it rs [nerlher ][prttcttccrltle ][nr.tr ][tlesirable ][to ][tnake any]oitrnrpt at di-tmitrng [lhe ][anrbtl ][ttJ tl.s ][c'rtttttrtlcrltort. ][Each ][case ][has ][lo ][be]deteritmetl [u,ilh ][reference ][lo ][lhc ][pctt'trc'ular ][krnd ][of ][actrvtty ][cuul]of [the ][prrtoil ][concertratJ. 'l'lmtgh ][ordmanly ]['business']occttpatron ,rrpin, a cortttrttrous [aclivtlT' ][ttt ][cur,tng ][ott ][a ][particular ][trade ][or] I1'A I 395/2006 [&. ][t656lTl0] ovoccttion, tt may also include on uc'/it,rly w,hich may be calletl,'quie,scenl'."'quie,scenl'." 11. rnCIT v. Motilal Haribhqi Spnnrng antl l4/eut,rng Co. Ltd., (1978) 113 ITR173 (Guj ), it was held as under. - "In Oriental Investment Co. Ltcl. ('ontnisstoner of Income Tax,(1957) 32 I7'R 664 (SC), tt w,a.y ob.ycrvcd that merely because thecompany hadwithin ils ob.jecls lhe c{euling in tnveslntent in shares doesrtttt give to it the characterntics o-/' cr dcoler m shares. But if otherarcumstance.t [qre ]proved, il trtctl, bc tt t'clevqnl ciramtstance for lhepurpose of delermming the nulure (t'ucttvtlies o.f'an assessee. It wouldthus appear that.for lhe purpose oJ.luclgiitg v;hether lhe transactions rnadvances of montes were in lhe rtului'c rl' bu.stness or investment, theTnbunal was entitled to rely upott lhc ob.lccts clmrses along with othercircuntstances and to arrive at tha c'ottclusrort thal it did." This Court has considered thc subnrissions ['l'he ]['fribunal ]held as follows on this issue: - "In Oriental Investment Co. Ltcl. ('ontnisstoner of Income Tax,(1957) 32 I7'R 664 (SC), tt w,a.y ob.ycrvcd that merely because thecompany hadwithin ils ob.jecls lhe c{euling in tnveslntent in shares doesrtttt give to it the characterntics o-/' cr dcoler m shares. But if otherarcumstance.t [qre ]proved, il trtctl, bc tt t'clevqnl ciramtstance for lhepurpose of delermming the nulure (t'ucttvtlies o.f'an assessee. It wouldthus appear that.for lhe purpose oJ.luclgiitg v;hether lhe transactions rnadvances of montes were in lhe rtului'c rl' bu.stness or investment, theTnbunal was entitled to rely upott lhc ob.lccts clmrses along with othercircuntstances and to arrive at tha c'ottclusrort thal it did." This Court has considered thc subnrissions ['l'he ]['fribunal ]held as follows on this issue: - "Though it is true thot Memoruxlun urcl Articles of Association of thecompony is ttot conclustve ort tlie que.\lrolt whelher activities of acompany amounts to carryittg ott lhc qtreslron v,helher actiwfies of acompany amounts lo carrying ort of busirrcss, but il shows sfficientlythe intenlion of the assessee to l)urstrc cerlam mam ohjects. T'hefreErency [of ][the ][activity ][is ][sought ][to ][bc hrghlighted ][as ][giving ]rise [to ]ocompany amounts to carryittg ott lhc qtreslron v,helher actiwfies of acompany amounts lo carrying ort of busirrcss, but il shows sfficientlythe intenlion of the assessee to l)urstrc cerlam mam ohjects. T'hefreErency [of ][the ][activity ][is ][sought ][to ][bc hrghlighted ][as ][giving ]rise [to ]oconlinuous and organrzed acltvttl;. Ltr'e huve ulrecrdy noticed that it rsthe first year of business oltcruiion of' ilu compuny and it cannot besatd that it was a continuous ctcln,tls, cun'ied oul ttt tt normal organizedmanner. As held by the rrs,!c,r.t/i,s o{f tcar, the main activity of thesatd that it was a continuous ctcln,tls, cun'ied oul ttt tt normal organizedmanner. As held by the rrs,!c,r.t/i,s o{f tcar, the main activity of theassessee company was the busitrc.s's' a.l'l,ronrclrtry, e.slablishmg teleconrservices. By rc stretch oJ rmagrnuttort c'ctt it be saicl that the assesseeservices. By rc stretch oJ rmagrnuttort c'ctt it be saicl that the assesseewas engqged in the busness oJ'nronay lerdrng. Since the business ofthe assessee v)cts not thal o.f nntrcy lcinltng, tl cattnctt be said that thesum in queslion represents motrcy letrt irt the u"dinary course of thesum in queslion represents motrcy letrt irt the u"dinary course of thebusiness of money lending ccu'rted ort b.1, the u,ssessee. fherefore, theclarm o.f the [qssessee ]did nol.full vrtlrttt lhe poranteters of provisions ofclarm o.f the [qssessee ]did nol.full vrtlrttt lhe poranteters of provisions ofsection 36(l)fut) read wilh sccitr.trt 36(2) oJ the Act. ['l'he ]alternativeclaim of the assessee lhat the flrnt tn tlttc.s'liort should be allowed as aclaim of the assessee lhat the flrnt tn tlttc.s'liort should be allowed as a deductron as a busnrcs.s [/oss ][cannol ][al.w ][he ][uccepted, ][since lhe sun' ][nt]question was not utcurred [as ][erytetulrlttre ][til ][lhe ordtnary ][course ][of]brrrrrrrs of the [qssessee. ][T'he ][suttt ][ttr ][tptesltrtn ][has, ][therefore, ][to ][be]cutstdered as a capttal [los,s ][cuul ][llte ][u.s.se.ssee ][:r''cts ][not ][entitled ][lo ][claint]the sante as deductiort. It [ntal' ulso bc ][menltotrcd ][here ][that ][everyth\rg]associaled or connected [wilh ][lhe ][bttstttc.s:; ][ccrttnol ][be said ][to ][be]mcrdenlal thereto. It rs [ttot ][enttugh ]i'tharc [ts ]'rome [close ][proxiruty ][of]the tleposrt lo the business [carrtetl ][ott ][bS' ][lhe ][assessee, ][as ][Yrch but ][il]should also be an uilegral [part ][oJ'the ][currl;rttg on ][of ][the ][husiness. ][I;or]the reasons stated ebove, [v,e ][are ][tf'tlrc ][r'tcl' ][lhctl ][the ][dtsallotuance ][made]by the assessutg fficer [v'os ][propct' ][tncl ][the ][CI'I' ][(.lppeals) ][v'as ]iustifiedih cottfirmrng the ortler of [tlrc ][rr.\'.rsr.\/r/g ][r.1l/icer. ][I(e ][ntay ][also ][clartfl']that the CIT [(Appeal.s)'s ][obsert'(lttons ][tlrul ][tlu ][clarm ][of ][the ][as'sessee ][wQS]pre-malure ts vtlhoul any [basts ][ulkl ][Y'e ][lnt'e ][ulreadT' ][dtscusse<l the]reasonsfor cnrr conclusiorts. [7'he ][thtrcl ][groutul ][of appeal ][of ][the ][assessee]n accordrngly drsnrt [ss."] lZ While it is true that the [term 'busincss' is ][of ][wide ][connotation, the ][true ][and]applicable test in the opinion of [this ][(lour1 u,as articulated ][in ]['futtconn ][Alkalt]Chemcals & Fernhzers [Ltd. ][t,. CIT', ][(1997) 227 ][l'l.l\ ][172, ][which ][reads ][as ][under ][-] lZ While it is true that the [term 'busincss' is ][of ][wide ][connotation, the ][true ][and]applicable test in the opinion of [this ][(lour1 u,as articulated ][in ]['futtconn ][Alkalt]Chemcals & Fernhzers [Ltd. ][t,. CIT', ][(1997) 227 ][l'l.l\ ][172, ][which ][reads ][as ][under ][-] "1-he basc proposttion thal lms lo ha [bonte tn ][mrnd ][rn ][thrs ][case ][is lhat]rt rs posstile for a compan), [lo ][ha,e ][.st:t ][dlferenl ][sources ][of ][ttrconte,]each one of v,hrch wrll be [chargeuble ][l0 ][tttcome-lox. ][Profrls ][and gatns]of busrness or professrcn ts [onlT' ][orte ][of ][the ][hcad.s ][under w'hch ][the]company's ittcome is [lruble ][lo ][he ][ussvs.secl ][lo ][lux. ][I/a ][compan)' has ][nol]crrnimencerl business, [lhere cumtol ][he ][nry ][que'sliott ][rtf ][assessntent ][of ][tls]profits and gauts of business. ['l-hut ][tloe.s ][rtol ][neail ][that ][unlil ][and ][unless]lhe company commences [ils ][bu.sttrcss, ][tt.s ][tttconte ]J|otn [any other ][source]wrll rtot be taxetl. If [lhe ][conry)en)', ][even ][be.fbre ][rl ][contntences ][busrnes.s,]untesls the wrplus fiurds [rtt ][rl.; ][hutrcls ].fbr [put'chase ][of ][land ][or ][house]property -be antt liter sells it [al ][pyof ][tl, ][ihe ][guttt ][mocle ][by ][lhe ][companl'vill]assessable under the head ["()uprtul ][gl:,ttts". ][*milarly, ][tf a ][contpany]purchases 'tax a rented lnuse [and ][gel.s ][rettl, ][.;uch ][reill ][\r'ill ][be assessable ][to]under section 22 as [urc'il?e ]fi'rtn [furusa ][properly. ][Likewise, ][a]Company nta1, hsyts [ittconte ]from [olher ][sottrceS. ][It ][nny ][buy ][shares ][and]get'dnr-t)enis. Such tlwitJends [v'tll ][be ][tuxaltle ][under section ][56 ][o.f ][the]Act. The company may also, us [rtt ][lltts ][ca.se, ][keep ][lhe rurplus ]funds [rn]short-lernt tlepostls tn ortler [lo ][a(ttt ][utteresl. Such uilerest ][wrll ][be]chargeable under [seclnn ][56 ][of ][the ][,'1c't'"]each one of v,hrch wrll be [chargeuble ][l0 ][tttcome-lox. ][Profrls ][and gatns]of busrness or professrcn ts [onlT' ][orte ][of ][the ][hcad.s ][under w'hch ][the]company's ittcome is [lruble ][lo ][he ][ussvs.secl ][lo ][lux. ][I/a ][compan)' has ][nol]crrnimencerl business, [lhere cumtol ][he ][nry ][que'sliott ][rtf ][assessntent ][of ][tls]profits and gauts of business. ['l-hut ][tloe.s ][rtol ][neail ][that ][unlil ][and ][unless]lhe company commences [ils ][bu.sttrcss, ][tt.s ][tttconte ]J|otn [any other ][source]wrll rtot be taxetl. If [lhe ][conry)en)', ][even ][be.fbre ][rl ][contntences ][busrnes.s,]untesls the wrplus fiurds [rtt ][rl.; ][hutrcls ].fbr [put'chase ][of ][land ][or ][house]property -be antt liter sells it [al ][pyof ][tl, ][ihe ][guttt ][mocle ][by ][lhe ][companl'vill]assessable under the head ["()uprtul ][gl:,ttts". ][*milarly, ][tf a ][contpany]purchases 'tax a rented lnuse [and ][gel.s ][rettl, ][.;uch ][reill ][\r'ill ][be assessable ][to]under section 22 as [urc'il?e ]fi'rtn [furusa ][properly. ][Likewise, ][a]Company nta1, hsyts [ittconte ]from [olher ][sottrceS. ][It ][nny ][buy ][shares ][and]get'dnr-t)enis. Such tlwitJends [v'tll ][be ][tuxaltle ][under section ][56 ][o.f ][the]Act. The company may also, us [rtt ][lltts ][ca.se, ][keep ][lhe rurplus ]funds [rn]short-lernt tlepostls tn ortler [lo ][a(ttt ][utteresl. Such uilerest ][wrll ][be]chargeable under [seclnn ][56 ][of ][the ][,'1c't'"] 13. In this case the Commissioner (Appcals) {brrncd the opinion that the claim waspremature and held against the assessee. ['fhc ]lindings are that its core or mainbusiness is telecom ventures. The low'er authorities have held that the assesseeefficiently utilised its funds by keeping ttrcrn in intcr-corporate deposits. That wouldnot amount to carrying on a business ['['he ]intcrcst was asscssed, rightly, under thehead "income from other sources". ['l'he ]intcr-crl'ptrratc dcposit was not a trade debt orpart of any money-lending business. 13. In this case the Commissioner (Appcals) {brrncd the opinion that the claim waspremature and held against the assessee. ['fhc ]lindings are that its core or mainbusiness is telecom ventures. The low'er authorities have held that the assesseeefficiently utilised its funds by keeping ttrcrn in intcr-corporate deposits. That wouldnot amount to carrying on a business ['['he ]intcrcst was asscssed, rightly, under thehead "income from other sources". ['l'he ]intcr-crl'ptrratc dcposit was not a trade debt orpart of any money-lending business. This Court is satisfied that therc is no error in thc findings recorded by thel'ribunal on this The third question is also an:;*,cred in Favour of the Revenue andagainst the assessee. For the above reasons the appeal fails and is dismissed withoutany order as to costs S. RAVINDRA IlHr\I'. J DECEMBEII 18.2012hs h.^--R.V.EASWAR, J ITn l :i9s/2006 &. 1656t2t0 SOi\NtigilcsD*i*t:tbPas,c l0 of 1 0T;;;Y,.;l-----