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Purchase of a software

AS 329 views 1 replies

CA M.Prabakaran

Manager - F&A

81 Points Joined May 2012

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.

Replies (1)

Shivani Mittal

Practice

425 Points Joined September 2009

Any of the above options can be availed. The only thing which is to be kept in mind is that in case the vendor is not a financial institution, TDS has to be deducted on the interest payment, if applicable.