Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (6) TMI 1259 - AT - Income TaxNature of expenditure - software expenses - revenue or capital in nature - Expenses incurred on registration of domain was disallowed by the AO on the plea that same is capital in nature - HELD THAT:- Hon’ble Bombay High Court in the case of Raychem RPG Ltd. [2011 (7) TMI 953 - BOMBAY HIGH COURT] has held that software did not form part of the profit-making apparatus, it facilitate the assessee’s trading operations or enable the management to conduct the assessee’s business more efficiently or more profitably but it was not in the nature of profit-making apparatus. Therefore, expenditure on software is to be allowed as revenue expenditure. Hon’ble Delhi High Court in the case of Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] has held that software expenditure is incurred not to create new asset or a new source of income but to upgrade the system. Even the extent of expenditure is not a decisive factor in determining its nature. It was held that software expenditure so incurred is revenue in nature. We do not find any merit in the action of the lower authorities for treating software expenses as capital in nature. Accordingly, the AO is directed to allow software expenses as revenue expenditure. Disallowance of repairs and maintenance, renovation expenses by treating the same as capital - contention of AO was that the said expenses add on the cost of the system and in turn gives benefit of enduring nature to the assessee’s business - HELD THAT:- The amount incurred on purchase of Ram and hard disk drive is recurring in nature and no advantage of enduring benefit is achieved by the assessee. Accordingly, there is no justification for treating the same as capital expenditure. In regard to the expenditure incurred on interior work done at Bangalore office no new asset was created but expenditure was made to have a better look and facilitate efficient working in the office of the rented premises. Accordingly, we do not find any merit in the action of the lower authorities for treating these expenses as capital in nature.
|