TaxTMI 
TaxTMI 
Purchasing a tally software worth rs. 12000 during tax audit what treatment will be done?
1) wheteher shown in repair & maintenance ac/c
2) w2hether shown in fixed assets a/c.
tratment of software during tax audit
26 Aug 2011 
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Capitalisation of software: treat business accounting software as part of fixed assets with allowable tax depreciation.
Software purchased for business use may be capitalised under computers and software and included in the block of assets; depreciation is allowable at the prescribed tax rate with a reduced allowance for short term use. Replacement after a crash can be treated as revenue expenditure, but replacement by upgraded software may be challenged; for small value items it is pragmatically advisable to capitalise and treat as part of the block of assets to minimise litigation risk. (AI Summary)
Software purchased for business use may be capitalised under computers and software and included in the block of assets; depreciation is allowable at the prescribed tax rate with a reduced allowance for short term use. Replacement after a crash can be treated as revenue expenditure, but replacement by upgraded software may be challenged; for small value items it is pragmatically advisable to capitalise and treat as part of the block of assets to minimise litigation risk. (AI Summary)