Depriciation
This query is : Resolved
09 December 2008
Can any one tell me that whether we have to capitalise it or not with Proof.
Software purchase from Indian vendor Value Aprox 90,000
Software purchase from Indian vendor Value Aprox 90,000
09 December 2008
If the organisation will be benefited from installing such software for more than 1 year then it should be capitalised .
And in case such software gets redundant in near future due to new technology/anticipated market trends then it should be charged to revenue in the same year
And in case such software gets redundant in near future due to new technology/anticipated market trends then it should be charged to revenue in the same year
09 December 2008
Dear Friend,
As per AS 26, Intangible asset purchased should be accounted at the acquisition cost provided the recognition criteria is satisfied:
Recognition Criteria:
a. Whether future economic benefits flow to enterprise?
b. Whether cost should be measured reliably?
If the above questions are answerable, Intangible asset can be recognised.
Since in the given case, Cost of the software is Rs.90,000 cost is measurable reliably. See whether the software will provide future economic benefits. If so you can capitalise.
As per AS 26, Intangible asset purchased should be accounted at the acquisition cost provided the recognition criteria is satisfied:
Recognition Criteria:
a. Whether future economic benefits flow to enterprise?
b. Whether cost should be measured reliably?
If the above questions are answerable, Intangible asset can be recognised.
Since in the given case, Cost of the software is Rs.90,000 cost is measurable reliably. See whether the software will provide future economic benefits. If so you can capitalise.
09 December 2008
Pl visit
https://www.financialexpress.com/news/software-to-expense-or-capitalise/122903/2. You find the following:
"Application software, purchased off-the-shelf, typically has a useful life of 1-2 years, after which subsequent versions driven by rapid changes in user needs and underlying technology renders it obsolete, thus triggering replacement costs.
There is, therefore, a case for expensing the same. Customised software specifically created for a particular assessee or ERP packages/ modules are typically not replaced in the short or medium term, and, therefore, could grant an enduring benefit to the assessee - these can be construed as capital assets. Systems software is required for making a hardware system functional and should therefore ideally be capitalised.
What is required, in current circumstances, is a clear understanding of the facts of the case and mapping of such facts to the existing taxation statute and principles, judicially defined."
So decide for yourself depending on facts. May be in your case, you have to capitalise.
https://www.financialexpress.com/news/software-to-expense-or-capitalise/122903/2. You find the following:
"Application software, purchased off-the-shelf, typically has a useful life of 1-2 years, after which subsequent versions driven by rapid changes in user needs and underlying technology renders it obsolete, thus triggering replacement costs.
There is, therefore, a case for expensing the same. Customised software specifically created for a particular assessee or ERP packages/ modules are typically not replaced in the short or medium term, and, therefore, could grant an enduring benefit to the assessee - these can be construed as capital assets. Systems software is required for making a hardware system functional and should therefore ideally be capitalised.
What is required, in current circumstances, is a clear understanding of the facts of the case and mapping of such facts to the existing taxation statute and principles, judicially defined."
So decide for yourself depending on facts. May be in your case, you have to capitalise.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Taxable or Tax exempt
- CAPITAL GAIN BASE ON NOTIFICATION
- Form 140 tds
- ITDS U/S.194T of Firm
- NRI starting business in India
- ADVANCE PAYMENT OF ADVOCATE
- GST not cancelled by tenant
- Filling ITR - U
- Eway bill not cancelled within 24 hous what can be due
- REGARDING ANNUAL RETURNS FILLINGS OF A COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
- LLP audit under companies act
- Experienced CA recommendation from Kolkata for FNO return filing
- Interest Reporting in Form 168
- Sales of goods of amount Rs77 lakhs to a party
- Tax Demand of ₹4,650 for AY 2026-27
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
