Functional test for software expense, section 14A computation and Debenture Redemption Reserve treatment under MAT

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....Software expenditure was held to require a year-specific functional test: software forming part of the profit-making apparatus and enhancing system capacity or functionality was treated as capital expenditure with depreciation allowable, while routine subscription-based software was allowed as revenue expenditure. Section 14A disallowance was confined by applying the presumption that investments were made out of own funds where interest-free funds exceeded investments, and Rule 8D(2)(iii) was restricted to investments that actually yielded exempt income; no MAT addition followed where there was no disallowance under Rule 8D(2)(i). Debenture Redemption Reserve was held to be a provision for a known liability set apart for debenture redemption, not an unascertained reserve, and was excluded from book profit under section 115JB.....