आदेश / ORDER

PER BEENA PILLAI, JUDICIAL MEMBER:

These are cross-appeals filed by the assessee as well as the Revenue for A.Y. 2014–15 arising out of the impugned order passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter the “Ld.CIT(A)”] dated 11/09/2025. The Revenue has also preferred appeal for A.Y. 2018–19 against the impugned order dated 04/06/2025 passed by the NFAC, Delhi.

Since common issues are involved, these appeals were heard together and are being disposed of by way of this consolidated order.

2. Revenue has raised following grounds of appeal for AY 2018-19:

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 Rs 37,87,67,000/- 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 ₹37,87,67,000/- 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. Identical issue has been raised by the revenue for AY 2014-15:

“1) Ground 1. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.4,49,36,812 made by the Assessing Officer by treating software expenditure as capital in nature and allowing full deduction as revenue expenditure, without appreciating that the said expenditure was incurred for acquisition and upgradation of software systems providing enduring benefit to the assesse.

2) Ground 2. Whether the learned CIT(A) erred in law and on facts in holding that software expenditure incurred towards purchase and development of software platforms is revenue in nature, ignoring the settled legal position that expenditure resulting in acquisition of an asset of enduring nature is capital expenditure eligible only for depreciation u/s 32.

3) Ground 3. Whether the learned CIT(A) failed to appreciate that the Assessing Officer had allowed depreciation a