In the instant case the assessee had incurred expenses towards software license and claimed the same as revenue expenditure. The AO disallowed the claim of the assessee. On appeal, the CIT (A) reversed the order of AO. Aggrieved revenue filed the instant appeal.
The Tribunal held in favour of assessee as under:
1) When the assessee had acquired the license to use the software and the license was valid only for one year, it might be useful to the assessee for various functions like sales, finance, logistics operations and use of ERP system and it might confer certain benefits to the assessee but it couldn’t be said that there was enduring benefit to the assessee;
2) Thus, respectfully following the decision of the Bombay High Court in the case of CIT v. Raychem RPG Ltd. [2012] 346 ITR 138/21 taxmann.com 507 and taking into consideration the facts of the case, it was to be held that the expense incurred by the assessee to acquire the software license was revenue expense – Dy. CIT v. Danfoss Industries (P.) Ltd. [2013] 37 taxmann.com 240 (Chennai - Trib.)
The Tribunal held in favour of assessee as under:
1) When the assessee had acquired the license to use the software and the license was valid only for one year, it might be useful to the assessee for various functions like sales, finance, logistics operations and use of ERP system and it might confer certain benefits to the assessee but it couldn’t be said that there was enduring benefit to the assessee;
2) Thus, respectfully following the decision of the Bombay High Court in the case of CIT v. Raychem RPG Ltd. [2012] 346 ITR 138/21 taxmann.com 507 and taking into consideration the facts of the case, it was to be held that the expense incurred by the assessee to acquire the software license was revenue expense – Dy. CIT v. Danfoss Industries (P.) Ltd. [2013] 37 taxmann.com 240 (Chennai - Trib.)
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