Q. Treatment of Expenditure incurred on purchase and implementation of SAP

Question

Query: Treatment of Expenditure incurred on purchase and implementation of SAP

Facts of the case:

A Company during the FY2022-2023 has acquired a Software(SAP) on the payment term of uses charges on yearly basis.
During the FY 2022-2023 the Company had paid one time implementation fee amounting to Rs.100 Lacs along with proportionate uses charges of Rs.25 Lacs( Rs.100 Lacs annually).
The above said SAP is comes in operation/start up w.e.f 01.04.2024
Please suggest the treatment of above payments made in the books of the Company according to Income Tax and Company Law provisions.

Answer 1

One time implementation cost should be capitalised as intangible asset. Annual fee should be charged to revenue.