Recurring software maintenance payments were held to be revenue expenditure, not capital outlay, on the facts presented.

Software licence fees and software maintenance fees were treated as revenue expenditure because the payments were recurring, made yearly, and related to maintaining software used in the refinery's decision-support and production-optimisation system. The concurrent factual finding accepted by the first appellate authority and the Tribunal was that the outgoings were for maintenance rather than acquisition of a capital asset or a capital advantage. Authorities cited by the Revenue were distinguished because they involved outright software acquisition or integrated hardware-software arrangements. The court held that the Revenue failed to show any legal error in that factual conclusion, so the appeal was dismissed.

---

---

Issues: Whether software licence fees and software maintenance fees incurred by the assessee were to be treated as revenue expenditure or capital expenditure.

Analysis: The decisive finding was that the expenditure was recurring in nature and was incurred for maintaining the software used in the refinery's decision-support and production-optimisation system. The factual appreciation recorded by the first appellate authority, which the Tribunal affirmed, showed that the payments were made on a yearly basis and were for maintenance rather than acquisition of an asset giving rise to a capital advantage. Authorities cited by the Revenue were distinguished on facts because they involved outright acquisition of software or integrated hardware-software arrangements, unlike the present case.

Conclusion: The expenditure was rightly treated as revenue expenditure and not capital expenditure.

Final Conclusion: The Revenue failed to establish any legal error in the concurrent factual finding that the software-related payments were revenue in character, so the appeal was dismissed.

Ratio Decidendi: Where software-related payments are shown on facts to be recurring maintenance outgoings and not consideration for acquisition of a capital asset, they are to be allowed as revenue expenditure notwithstanding the Revenue's reliance on the enduring benefit test.

---