TaxTMI 
TaxTMI 
2026 (3) TMI 1219
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....-tax Act, 1961 (hereinafter referred to as the "Act"), dated 28.12.2019 for AY 2017-18. 2. Grounds taken by the Revenue are reproduced as under: "1. "Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the software expenses amounting to Rs. 28,24,19,000/- incurred by the assessee were revenue in nature, ignoring the fact that such expenditure resulted in enduring benefit to the assessee and hence was rightly treated as capital expenditure by the Assessing Officer". 2 "Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that software expenses amounting to Rs. 28,24,19,000/- were revenue in nature, without appr....
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....ons, and thus, the order of the AO treating the impugned software expenditure as capital and allowing depreciation thereon may kindly be restored"." 2.1. The only issue involved in this appeal is in respect of treatment of software expenses amounting to Rs. 28,24,19,000/-, whether revenue or capital in nature. 3. Brief facts of the case are that assessee is registered under the Software Technology Parks of India (STPI) Scheme and operates as a captive service provider for BNP Paribas Group. It filed its return of income on 30.11.2017, reporting total income at Rs. 167,95,07,080/- which was revised on 19.03.2019 with revised total income at Rs. 167,17,30,710/-. In respect of the grounds raised, assessee had debited expenditure amountin....
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....y commercial principles of accounting and in absence of any contrary provision under the Act, such commercial accounting treatment followed by the assessee in its books of account and as certified by the statutory auditor are uncontroverted. c. The said software expenses have a direct nexus with the business of the assessee and have been incurred wholly and exclusively for its business, allowable u/s. 37(1). d. Ld. AO erred in holding that the software expenses are capital in nature by relying on general proposition of law without having regard to the actual facts of the case and without appreciating the real nature of expenses incurred by the assessee. 4.1. Reference is also made to details furnished by the assessee in....
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....d it is evidently discernible that all these expenses incurred by the assessee are on account of annual maintenance charge, fees for database support, licence renewal cost etc. These are all "period cost" and "recurring" in nature. Assessee incurred these expenses not for acquiring any right in the software, but are towards subscription for a fixed period giving annual benefits only. 6.1. No enduring benefits accrued to the assessee by incurring these period costs. Ld. AO has not doubted on the legitimacy of these expenses incurred for the purpose of business. Also, ld. AO has not brought on record any cogent material to evidently demonstrate that any capital asset is brought into existence, resulting into enduring benefits to the assess....
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....ere is no change in the asset base of the assessee. Accordingly, keeping the above discussion in juxtaposition, we do not find any reason to interfere with the findings arrived at by ld. CIT(A), whereby the addition made by the ld. AO is deleted. Accordingly, grounds raised by the Revenue are dismissed. 7. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 09.02.2026. ============= Document 1 BNP Paribas India Solutions Private Limited Assessment Year 2017-18 Details of Software expenses Name of the Party Narration Amount (INR) BI INFOTECH LIMITED OMS AMC CHG 741.188 ABS INDIA PVT LTD AMC SER CHG ON SITE 2.745.723 ADVANCE TECH CONTROLS PVT LTD AMC NICE VOICE RECORDING SYSTEM 4,050....
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....80 GODREJ & BOYCE MFG CO LTD AMC CHGS 3,051,306 HP INDIA SALES PRIVATE LTD CLICK CHARGES 6.512.334 IMAGE INFOSYSTEMS PVT LTD AMC CHARGES 675.902 INDIAN FINANCIAL TECHNOLOGY MPLS LINK YEARLY CHARGES 502,500 INSIGHT TECHNOLOGY SOLUTIONS MICROSOFT EA PRICT ALNG LIC & ADOBE ACROBAT 10.194,103 STANDARD & CREATIVE CLOUD KALPATARU COMPUTER SERVICES PVT AMC DEBOS & NLADS 196,600 KELWAY(UK)LIMITED REDHAT SUPPORT 6.412.696 LANTRO TECHNOLOGIES INDIA NETWORK CABLE SUPP 251.250 LENOVO INDIA PVT LTD AMC RENWAL OF IBM SERIES SERVER 387,817 LEXINGTON SOFT PRIVATE LIMITED SOFTWARE MAINTENANCE CHGS 523.773 MAGNAMIOUS SYSTEMS PVT LTD CITRIX RENEWAL CHARGES 575.553 MARKIT MARKET DATA SUPPORT 3,601.864 MICROSOFT CORPOR....