Expenditure : Capital or revenue : S. 37 of I. T. Act 1961 : A. Y. 2002-03 : Amount spent on computer software is revenue expenditure.

[CIT vs. Varinder Agro Chemicals Ltd.; 309 ITR 272
(P&H)].

For the A. Y. 2002-03, the Assessing Officer disallowed the
claim of the appellant for deduction of the expenditure on acquisition of
computer software holding that it is capital in nature on the ground that
enduring advantage was derived by the assessee by incurring such expenditure.
The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Punjab and Haryana High Court
upheld the decision of the Tribunal and held as under :

“There is nothing to show that the software used by the
assessee was of enduring nature and will not become outdated. Since
technology is fast changing and day by day systems are being developed in a
new way, software may be needed like raw material. The view taken by the
Tribunal is certainly a possible view.”