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2013 (2) TMI 108 - KARNATAKA HIGH COURTLicence fee for the use of software - Revenue expenditure Versus Capital expenditure – Assessee debited the licence fee to the Profit and Loss Account – Held that:- When the software are licensed for a particular period, for utilizing the same for the subsequent years fresh licence fee is to be paid, without renewing the licence or without paying the fee on such renewal, it is not possible to use those software – When the life of a computer or software is less than two years, fee paid for the acquisition of the right to use the same is allowable as revenue expenditure – Decided against the revenue. Whether provision for warranty is a contingent liability – Assessee claimed deduction – Held that:- As decided in Rotark Controls India P. Ltd. v. CIT reported in [2009 (5) TMI 16 - SUPREME COURT OF INDIA] makes it clear the historical trend is the question whether in the past there was any defect in the manufactured goods and not the actual expenditure incurred in rectifying the defect or in substituting the defective product with a defectless product – Assuming that the amount of warranty claiming deduction is actual and not incurred by the assessee, the difference in the amount is taxed in the subsequent year – warranty is not a contingent liability and the assessee is entitled to claim deduction – Decided against the revenue.
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