MVM Industries Vs DCIT/ACIT (ITAT Chandigarh)
CAD Software is Revenue Expenditure; Full 80IC Benefit Allowed
Assessee, eligible for deduction u/s 80IC @25%, purchased Premium CAD software worth ₹25,94,500. AO held it to be capital expenditure, allowed only 12.5% depreciation (treating it as used for <180 days), and reduced the 80IC deduction. CIT(A) upheld the view.
Before Tribunal, assessee argued that design/software tools have short useful life, require regular upgrades, and provide no enduring advantage, thus are revenue in nature.
ITAT accepted this contention and held that software does not create an enduring benefit and is therefore allowable as revenue expenditure, not capital. Consequently, disallowance made by AO/CIT(A) was reversed.
AO was directed to allow the entire software cost as revenue expenditure and recompute deduction u/s 80IC accordingly.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 05.03.2025 passed for assessment year 2017-18.
2. The assessee has taken three grounds of appeal out of which ground Nos. 1 and 3 are general grounds which do not call for recording of any finding.
3. In ground No.2, assessee has pleaded that ld.CIT (Appeals) has erred in upholding the action of the AO vide which expenditure of Rs.25,94,500/- incurred on procuring Premium CAD Software as capital expenditure and consequently, disallowance was made in the computation of deduction u/s 80IC of the Act.
