Expense should be cpitalised or charged to revenue
Querist : Anonymous
what if software is purchased by company and if software is prepared in house by the company ?
please provide the answer or article on it.
Asahi India Safety Glass Ltd's case reported in (2011) 203 Taxman 277 (Del).
Once the tests of ownership and enduring benefit are satisfied, the question whether expenditure incurred on computer software is capital or revenue has to be seen from the point of view of its utility to a businessman and how important an economic or functional role it plays in his business. In other words, the functional test becomes more important and relevant because of the peculiar nature of the computer software and its possible use in different areas of business touching either capital, or revenue Held or its utility to a businessman which may touch either capital or revenue field.
different considerations will apply in testing the nature of expenditure in the context of acquisition of know-how compared to expenditure on acquisition of software because know-how is an intangible asset whereas as held by Hon'ble Supreme Court, software is a tangible asset.