Software expenses such as annual maintenance charges, database support fees and licence renewal costs, being in the nature of subscriptions for a fixed period and conferring benefits limited to that period, were held to be revenue in nature and allowable as a deduction under section 37(1).

1. (2026) 183 taxmann.com 396 (Mum Trib)

ACIT vs. BNP Paribas India Solutions (P.) Ltd.

A.Y.: 2017-18

Date of Order : 09.02.2026

Section: 37(1)

Software expenses such as annual maintenance charges, database support fees and licence renewal costs, being in the nature of subscriptions for a fixed period and conferring benefits limited to that period, were held to be revenue in nature and allowable as a deduction under section 37(1).

FACTS

The assessee was registered under the Software Technology Parks of India (STPI) Scheme and operated as a captive service provider for “B” Group. It filed its return of income, inter alia, debiting software expenditure amounting to Rs. 28,24,19,000 in its profit and loss account. During scrutiny proceedings, AO held that the expenses were capital in nature and therefore, allowed deduction of depreciation only to the extent of 60%.

Upon appeal, CIT(A) allowed the claim of the assessee, treating the software expenses as revenue in nature.

Aggrieved, the revenue filed