Upgradation of software expenses - Capital or revenue Exp.

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G.Kamatchi (Querist)
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04 July 2008 Upgradation of software expenses - whether it should be treated as Capital or revenue expenditure.

For instance whether expenses incurred in connection with upgradation from MS 2003 to MOS 2007 will be treated as capital or revenue.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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05 July 2008 Amount spent for acquiring of a new asset is treated as Capital Expenditure. Also, amount spent on imrovement of any asset is also treated as capital in nature. In the instance case the amount spent for upgradation is also an imrovement to the existing software which will definitely have certain extra features. As such, the amount spent for upgradation be treated as Capital Expenditure.