ACIT Vs BNP Paribas India Solutions Private Limited (ITAT Mumbai)
Software expenses held revenue in nature – Annual licence & maintenance costs give no enduring benefit – Revenue appeal dismissed – ITAT Mumbai
In ACIT vs BNP Paribas India Solutions Pvt. Ltd. (A.Y. 2017-18), the dispute was whether software expenditure of ₹28.24 crore should be treated as capital or revenue. The AO capitalised the expenses alleging enduring benefit and allowed depreciation, whereas CIT(A) treated them as revenue expenditure.
The ITAT examined the break-up of software expenses shown in the table on page 5, which consisted mainly of annual maintenance charges, database support fees, subscription charges and licence renewals. The Tribunal noted that these were recurring “period costs” paid for usage of software without creation of any asset or transfer of ownership rights. Since the expenditure did not bring any enduring benefit or new capital asset into existence, it was allowable u/s 37(1).
Relying on multiple judicial precedents, the Tribunal held that recurring software subscription and support costs are revenue in nature. Accordingly, CIT(A)’s order allowing deduction was upheld and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the Revenue is against the order of National Faceless Appeal Centre (NFAC), Delhi vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1079062407(1) dated 30.07.2025 passed against the assessment order u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 28.12.2019 for AY 2017-18.
