Business expenditure: Capital or revenue: A. Ys. 1994-95 to 2004-05: Media cost paid for the import of a master copy of Oracle Software used for duplication and licensing is an expenditure of a revenue nature and as such is an allowable deduction:

The Appellant company is a subsidiary of Oracle Corporation USA. The Appellant company entered into a licence agreement with its parent/holding company under which the Appellant was granted non-exclusive non-assignable right and authority to duplicate on appropriate carrier media software products or other products and sub-licence the same to third parties in India. The holding company retained the ownership of the copyright. For the relevant years the Assessing Officer disallowed the claim for deduction of the royalty paid to the holding company treating the same as capital expenditure. The Tribunal upheld the disallowance.

The Delhi Court reversed the decision of the Tribunal, allowed the assessee’s appeal and held that the expenditure was of revenue nature and as such an allowable deduction.