In a recent ruling, the Chennai bench of the ITAT held that license fee paid for using MS Office software constitutes revenue expenditure for which deduction under the Income Tax Act, 1961 is available to the Assessee.
In the instant case, the assessee purchased MS Office software and used the same in its business. Assessee’s claim for deduction of the said amount was denied by the Assessing Officer by finding that the same amount of capital expenditure.
The bench, while allowing the appeal, noted that by purchasing MS Office software, the assessee has not become an owner of the software.
“The ownership of MS Office software remained with Microsoft Company. The assessee has to necessarily renew the license period for using the same in the business. Merely because the assessee is using MS Office software as operating software in its system, it does not mean that MS Office software is the capital asset in the hands of the assessee-company. All assets/license for use of software cannot be construed as capital asset merely because it gives an enduring benefit. By using MS Office software in the business of the assessee, the assessee gets enduring benefit in the course of earning of profit. So long as the assessee is a licensee, the ownership of MS Office software remains with Microsoft Company. This Tribunal is of the considered opinion that the expenditure cannot be construed to be capital expenditure,” the bench said.
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