IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5688/MUM/2025 (Assessment Year: 2017-18)

Asst. Commissioner of Income vs BNP Paribas India Solutions Tax, Private Limited Circle 4(1)(1), Mumbai Block B3, 9th Floor, Nirlon Room No. 642, 6th Floor, Knowledge Park Village Pahadi, Aayakar Bhavan, Goregaon East, M.K. Road, Mumbai 400063 Mumbai 400020 PAN: (AACCB5717E)

Appellant Respondent Present for:

Assessee by : Shri Niraj Sheth, Advocate Revenue by : Shri Vaibhav Jain, CIT DR Date of Hearing : 13.11.2025 Date of Pronouncement : 09.02.2026

O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the Revenue is against the order of National Faceless Appeal Centre (NFAC), Delhi vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1079062407(1) dated 30.07.2025 passed against the assessment order u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 28.12.2019 for AY 2017-18.

2. Grounds taken by the Revenue are reproduced as under:

“1. "Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the software expenses amounting to ₹28,24,19,000/- incurred by the assessee were revenue in nature, ignoring the fact that such expenditure resulted in enduring benefit to the assessee and hence was rightly treated as capital expenditure by the Assessing Officer".

2 "Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that software expenses amounting to ₹28,24,19,000/- were revenue in nature, without appreciating that such expenditure resulted in acquisition of software tools and licenses of enduring utility and benefit to the assessee, and hence rightly treated as capital expenditure by the Assessing Officer".

3. "Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) failed to appreciate that the expenditure incurred towards software acquisition, database support, and license renewal formed an integral part of a capital asset that enhanced the assessee's business infrastructure, and therefore, the AO was justified in allowing depreciation thereon and disallowing the balance amount".

4. "Whether on the facts and in the circumstances of the case and in law, The learned CIT(A) erred in not considering the judicial precedents relied upon by the AO, which support the proposition that expenditure on software, particularly of high value and enduring utility, qualifies as capital expenditure".

5. "Whether on the facts and in the circumstances of the case and in law The learned CIT(A) failed to appreciate that the magnitude of the software expense and its recurring nature alone does not alter its capital character, especially when the software contributes to the long-term efficiency and profitability of the business operations".

6. "Whether on the facts and in the circumstances of the case and in law The order of the learned CIT(A) is contrary to the facts, applicable judicial precedents, and statutory provisions, and thus, the order of the AO treating the impugned software expenditure as capital and allowing depreciation thereon may kindly be restored".”

2.1. The only issue involved in this appeal is in respect of treatment of software expenses amounting to Rs. 28,24,19,000/-, whether revenue or capital in nature.

3. Brief facts of the case are that assessee is registered under the Software Technology Parks of India (STPI) Scheme and operates as a captive service provider for BNP Paribas Group. It filed its return of income on 30.11.2017, reporting total income at Rs.167,95,07,080/-

which was revised on 19.03.2019 with revised total income at Rs. 167,17,30,710/. In respect of the grounds raised, assessee had debited expenditure amounting to Rs. 28,24,19,000/- being software expenses in its profit and loss account for the year under consideration. Explanations were called for in this respect