Our Company has spent about Rs. 50,000 on ERP software. Should we capitalise it or treat it as revenue expenditure?
Thanks
21 Replies
Max Payne
(employed)
(2574 Points)
Replied 02 October 2009
From the tax perspective, you should capitalise the same as Computers and computer software and claim depreciation at the rate of 60%.
Assuming you are not developing the same for sale or disposal that is.
CA.Tarun Maheshwari
(CA, DISA)
(7150 Points)
Replied 02 October 2009
Practically, ERP software are considered to give benefit to the company for a long time and not going to be obsolete in short term period. So in my opinion, these should be capitalised, but the ultimate decision should be on the basis of materialy with respect to the volume and nature of business and the transaction involved.
Rajeev
(www.rkmco.com)
(985 Points)
Replied 03 October 2009
Its a Capital expense , The schedule itself says : Computers ( including computer software ) for depreciation .
Ankur Begwani
(Article Assistant)
(25 Points)
Replied 03 October 2009
Its a capital expense, hence it should be capitalize as computer in books companies act and as Intangible asset as per Income Tax Act.
Ratan Deep Saxena
(Asstt Manager (Accounts & Finance))
(2998 Points)
Replied 03 October 2009
Capital Expenditures are those those expenditure to provide long term benefits to the company. As per meaning of capital expenditure cost of ERP Software should be capitalised coz it provides enduring benefits to the company in near future for long time......
regards,
ratan
Shamita
(Learner)
(410 Points)
Replied 03 October 2009
Thanks everyone for your answers. One more ques.; whether the expenditure on website is a capital expenditure or revenue?
(Guest)
Expenditure on website are mainly of annual nature and these shuld be treated as revenue expenditure.
But if it is in lump sum payment for example payment for 5 yrs or even for more period then you have to deffered it. in this case you have to divide the entire amount into respective periods.
and write itoff periodically
skumar
(articalship)
(25 Points)
Replied 03 October 2009
It's a Fixed assets addition,
Added to block of Computers & Software,eligible for dep. under IT @ 60%.
Harshad Patil
(Industrial Training)
(130 Points)
Replied 03 October 2009
well its a Revenue to be deferred on reasonable time.
Bhargava Raju Dommaraju
(Chartered Accountant)
(24 Points)
Replied 03 October 2009
First Please clarify whether that is one time expenditure or maintenance kind of thing like AMC Charges.
If it is one time and is material enough and very important for the business and the benefit from it accrues for more than a year, then it needs to be capitalised as Intangible asset and amortised over a period of time.
If it is not material, write it off in the same year.
SAGARRAJE
(PRACTICING CHARTERED ACCOUNTANTS)
(108 Points)
Replied 03 October 2009
it is Capital expendiure.
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