ERP Software expenditure allowable as revenue expenditure – Bombay HC

CIT Vs. Raychem RPG Ltd (Bombay High Court)- When we apply this functional test suggested by the Special Bench of the Tribunal, we find that impugned software does not form part of the profit making apparatus of the assessee and hence the same is to be disallowed a revenue expenditure. We hold so because we find that the business of the assessee company is that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and impugned software is an Enterprises Resources Planning (ERP) package and hence it facilitate the assessee’s trading operations or enabling the management to conduct the assessee’s business more efficiently or more profitably but it is not in the nature of profit making apparatus. We, therefore, decide this issue also in favour of the assessee and we hold that this expenditure of Rs.20.60 lakhs is of revenue expenditure. We hold so by following the judgment of the Special Bench of the Tribunal relied upon by the LD AR of the assessee.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION.
INCOME TAX APPEAL NO. 4176 OF 2009
The Commissioner of Income Tax Vs. M/s Raychem RPG Ltd.

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