Purchase of a software

CA M.Prabakaran (Manager - F&A) (81 Points)

26 June 2014  

Hi All,

Kindly guide me on my queries relating to purchase of a software through loan.

For Example A Ltd wants to purchase a software costing Rs.1 crore from a vendor.Due to non-availability of funds the company decides to pay the vendor the price in 60 equated monthly instalments.Can this be done as the vendor is not a Hire purchase or a Leasing company? Whether i can make a loan agreement with the vendor to consider the cost of the asset as a loan which shall be repaid month on month along with interest over a fixed tenure?

Which option will be better to show in the books of accounts a) Lease or b) Loan  ?

Thanks in advance for your views.