Treatment of software purchase

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When purchasing software like TDS software, which is renewed annually, a key accounting question arises: should it be treated as a revenue expense or an intangible asset? Given its nature as application software, the prevailing view, supported by case law, is to treat such purchases as a revenue expense. This means the cost is debited to the Profit and Loss Account for the relevant financial year.

Rahul

Rahul (Querist)
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12 May 2020 we have purchase tds software and this can be renew every year and update accordingly, how can we treat it in books by taking it as revenue expense or treat as intangible asset. the value of software is 38000/- only, Suggest?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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12 May 2020 Seems 'revenue expenditure' , since it is an application software.

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Spurto Consultancy Services

Spurto Consultancy Services (Expert)
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12 May 2020 It has been decided in various case laws that purchase of application Software can be treated as revenue expenditure.
TDS software can be categorised as application software.