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| The Tax Publishers2020 TaxPub(DT) 3187 (Del-Trib) : (2021) 186 ITD 0353 INCOME TAX ACT, 1961
Section 37(1)
No ownership of any software was acquired by the assessee as a consequence of ERP expenditure. Assessee has only limited right to use concerned software product which assessee acquired without acquiring right of transferring the software. Accordingly, no benefit of an enduring nature had been derived by assessee as result of concerned expenditure and, therefore, it could not be held as of capital in nature.
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Capital or revenue expenditure - ERP and software related expenses - On implementation of new ERP package -
Assessee claimed deduction of ERP and software related expenses incurred on implementation of new ERP package. AO treated the same as of capital in nature and thus disallowed deduction.Held: No ownership of any software was acquired by the assessee as a consequence of ERP expenditure. Assessee has only limited right to use concerned software product which assessee acquired without acquiring right of transferring the software. AO ignored the fact that in today's fast changing technology where software becomes absolete for smooth functioning of business, software needs to be replaced/upgraded by an assessee from time-to-time. Accordingly, no benefit of an enduring nature had been derived by assessee as result of concerned expenditure and, therefore, it could not be held as of capital in nature.
REFERRED :
FAVOUR : In assedssee's favour.
A.Y. : 2001-02 to 2005-06
INCOME TAX ACT, 1961
Section 14A
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