This Tax Alert summarizes a recent decision of the Delhi High Court (HC) in the case of Oracle India Private Limited (Taxpayer) v. CIT on the issue of characterisation of expenditure, as capital or revenue, incurred for import of master copy of software used for duplication and sub-licensing to customers in India.
In this case, Taxpayer was required to frequently (i.e. ranging from a day to two months) import master copy with every update as the life cycle of each individual version of master copy was very limited and uncertain.
The HC held that, in the facts of the case, expenditure on acquiring master copy for updation of software used for duplication and licensing is revenue in nature for the reason that such master copies are subject to high obsolescence, constant improvement and upgradation and hence have no enduring benefit.
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