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"5.4.3 In I.T. Rules Part A under the main heading III Machinery and Plant item no. (5) shows depreciation allowance on Computer including computer software is 60%. Further, note 7 below Part - B says:

"Computer Software" means any computer program recorded on any disc, tape, perforated media or other information storage device.

From the above, it is clear that computer software is included as Machinery and Plant where allowable rate of depreciation is 60%.

Therefore, the remaining expenses on acquisition of computer software Rs. 10,91,10,107/-including the licenses are to be treated as capital in nature. Further, the case laws relied upon by the A/R viz. Amway India Enterprises Vs. DCIT [2008] 301 ITR (AT.) 0001 ITAT (Del.) (SB), CIT Vs. G.R Capital Services Ltd. [2008] 300 ITR 420 (Delhi), Business Information Processing Services Vs. ACIT [1999] 239 ITR (AT) 19 ITAT (Jai) and CIT Vs. Southern Roadways Ltd [2008] 304 ITR 84 (Mad.) are not of any help because all the decisions are pertaining to assessment years prior to amendment brought in w.e.f. April 1, 2003 where computer software was also included along with computer as a different class of asset within Machinery and Plant. In view of the above factual and legal position the AMC expenses Rs. 74,95,483/- mentioned above are to be treated as revenue expenditure and the remaining expenses Rs. 10,91,10,107/- are capital in nature. AO is directed to recompute the depreciation allowable on the above items of capital expenditure of Rs. 10,91,10,107/- on acquisition of software.