Revenue treatment for premium CAD software expenditure applied, with consequential benefit in section 80IC computation.

Premium CAD software expenditure was treated as revenue expenditure because the software had a short useful life and required continuous upgradation, so it did not create an enduring benefit justifying capital treatment. The restricted depreciation approach adopted by the lower authorities was not accepted, and the expenditure was allowed in full for tax purposes. The ruling also recognised the consequential impact on computation of deduction under section 80IC, with the assessee entitled to that corresponding benefit.

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Issues: Whether the expenditure incurred on procurement of premium CAD software was capital in nature or allowable as revenue expenditure, and the consequential effect on deduction under section 80IC of the Income-tax Act, 1961.

Analysis: The software had a short useful life and required continuous upgradation. On that basis, it did not confer an enduring benefit of the kind that would justify capital treatment. The disallowance made by the lower authorities, along with the restricted depreciation approach, was not accepted.

Conclusion: The expenditure of Rs. 25,94,500 was held to be revenue expenditure, and the assessee was held entitled to the consequential benefit in computation under section 80IC.

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