software - income tax treatment

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 pl clarify on the following

a co incurs expenditure on ERP implementation like SAP,  to cope up with modern accounting trends.  The benefit of ERP extends for more than an year (may be 5 years- by that time new versions may come, present version may become redundant)

 

what is the treatment of said expenditure in Financial books & I.T.- whether can be treated as a revenue expednture in the year of implementation.

 

 

regards

 

 

Replies (1)

Both the income tax act and the companies act provides the depreciation rates for the purchase amount of software, so that must be treated as capital expenditure............moreover it would going to benifit u over a certain period of time which extends to more than one yr, hence capital expenditure should be assumed in this regard...........the technology being getting obsolete in few yrs would not have effect on its nature....if it gives benifit for more than yr., it sould ideally be taken as capital exp..........

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