using git-bash, and a normal installation, some users see this:
*** This command executed from D:\someproject\dev (project development repo) *** $ arc upgrade --trace libphutil loaded from 'D:\Arcanist\libphutil\src'. arcanist loaded from 'D:\Arcanist\arcanist\src'. Config: Reading user configuration file "C:\Users\<censored>\AppData\Roaming/.arcrc"... Config: Reading system configuration file "C:\ProgramData\phabricator\arcanist\config"... Working Copy: Reading .arcconfig from "D:\someproject\dev/.arcconfig". Working Copy: Path "d:\someproject\dev" is part of `git` working copy "D:\someproject\dev". Working Copy: Project root is at "D:\someproject\dev". Config: Did not find local configuration at "D:\someproject\dev\.git\arc/config". Upgrading libphutil... Working Copy: No candidate locations for .arcconfig from this working directory. Working Copy: Path "D:\Arcanist\libphutil" is not in any working copy. [2015-09-22 20:19:13] EXCEPTION: (Exception) The current working directory is not part of a working copy for a supported version control system (Git, Subversion or Mercurial). at [<arcanist>\src\repository\api\ArcanistRepositoryAPI.php:82] arcanist(head=master, ref.master=28b89785fe5f), phutil(head=master, ref.master=c72eb747e706) #0 ArcanistRepositoryAPI::newAPIFromConfigurationManager(ArcanistConfigurationManager) called at [<arcanist>\src\workflow\ArcanistUpgradeWorkflow.php:42] #1 ArcanistUpgradeWorkflow::run() called at [<arcanist>\scripts\arcanist.php:382]
running arc which in 'D:\Arcanist\libphutil' does recognize it as a git repo.