31 December 2015
From Finance Act 2013, Software expense is now a revenue expenditure, it can not be capitalized Hence the software charges should be t/f to P&L a/c
31 December 2015
It is worth to note that rates of depreciation given in Income Tax Rules provide that computers including computer software are eligible for depreciation @ 60%.
But explanation 4 inserted by Finance Act, 2012 to the definition of royalty under section 9 clarifies that payment made towards purchase of computer software is royalty. Income Tax Rules cannot override the Income Tax Act.
Thus, amount paid to obtain computer software shall not be added to the block of assets of computer.
Therefore, to conclude with amount paid for purchase of computer software (including installation charges) is royalty and shall be allowed as deduction under section 37(1) as revenue expenditure subject to the provisions of section 40(a)(i) and section 40(a)(ia).
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