Income Tax Appellate Tribunal Delhi Amway India Enterprises vs The Deputy Commissioner Of IncomeTax on 15 February, 2008 Equivalent citations: [2008]111ITD112(DELHI), [2008]301ITR1(DELHI), (2008)114TTJ(DELHI)476 ORDER N.V. Vasudevan, J.M. 1. This Special Bench has been constituted u/s. 255(3) to dispose of the appeals filed in the case of M/s. Amway India Enterprises and M/s. SQL Star International Ltd., as well as to dispose of the following important questions which are involved therein: (i) Whether, in the facts and circumstances of the case, the expenditure incurred by the assessee on account of computer software is of revenue nature or capital nature? (ii) If the expenditure incurred on computer software is held to be of capital nature, what would be the rate of depreciation applicable thereon? 2. The factual backdrop which has given rise to the constitution of this Special Bench can be briefly summarized as follows. In the case of M/s Amway India Enterprises, a deduction on account of software expenditure incurred amounting to Rs. 20,04,105/ was claimed by the assessee company in its return of income filed for A.Y. 20012002. The said expenditure was claimed to be incurred by the assessee company for acquiring the following software for use in its business: 1. MS Project 2000 Full Packaged Product (FPP): Rs. 19,700/ Microsoft Office Project 2000 is used by project managers who need a desktop tool to manage their projects independently. These project managers do not require strong coordination with other project managers. Project 2000 is designed to improve ability to organize work and communicate effectively and succinctly through familiar, easytouse tools. The benefit of the software is to better organize and manage work and people to ensure that projects are delivered on time and within budget. It conveys project plans and status effectively and succinctly. It also enhances productivity and effectiveness by learning and applying project management practices easily. 2. MS project 2000 Central Open License Program: Rs. 78,600/ The software is basically platform software, this helps in operating MS Project 2000 Full Packaged Program software on to the serve without which server cannot host MS Project, 2000. 3. Macromedia Dream weaver and Flash: Rs. 35,800/ The Macromedia Dream weaver software includes the following: 1) Macromedia Dream weaver version 4.0 on Windows: Macro Media Dream weaver is the industryleading web development tool, enabling users to efficiently design, develop and maintain standardsbased websites and applications. With Dream weaver, web developers go from start to finish, creating and maintaining basic websites to advanced applications that support best practices and the latest technologies. 2) Macromedia Flash version 5.0 on Windows; Web Site designers and developers use Macromedia Flash to accelerate projects while maintaining a high degree of creative control. It provides standard Templates and Components, Macromedia online Resource Library and Speed workflow by directly importing media including digital video, PDF and EPS files. This software also helps in adding interactivity with powerful scripting. 4. Turbo Gold Software: Rs. 17,61,034.68 The software helps in compression of size of emails sent through the Lotus Notes mailing system. It includes licenses for 150 uses who are using Lotus Notes Mailing system and software license for running on its server. For Example: A user working on Lotus Notes Mailing system wants to send message through email. The email size containing the message in 2 MB (Mega Bytes). The Turbo Gold Software compresses the size of email lesser than 2 MB thus save time and usage cost. 5. Wintap call billing software Rs. 40,000/ This windows based software is used for recording telephone calls and its cost. The software provides complete detail in case of outgoing calls such as Extension No., Telephone Nos., Time of call and duration of call etc. 6. Bright Star Are Server Advance Edition: Rs. 2,50,000/ The function of software is to keep back up of data. It ensures that the data on the computer system are saved and stored and which may be retrieved in case the computer system is not working or the hard disk in the system gets crashed. 7. Windows 2000: Rs. 279,543/ The Windows 2000 Software comprised the following: i) Back Office Server 2000 English International CD 5 Clients Back Office Server 2000 has 5 server components to take backup of data base such as MS Exchange Server for Email back up, MS Windows Server for MS Windows data base and SQL Server for storage of other data base etc. The basic function is to store the data base in respective space contained under the server. ii) Windows 2000 Server Microsoft Open License Program (MOLP) Windows 2000 Server is the multipurpose network operating system for businesses of all sizes. Windows 2000 Server less the us