TaxTMI 
TaxTMI 
2021 (2) TMI 1026
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....med 'CONNECT' and this computer software is customized software to be used by its customers which are used for specific purposes and contain secret formula or process. During this year, assessee has declared Gross Revenue of Rs. 19,16,416/- and after accounting for various expenses, it declared net loss of Rs. 4,73,311/-. 4. During the assessment proceedings, AO observed that assessee had disclosed the deletion of Intangible Asset Computer Software at Rs,2,01,87,114/- (which is the CONNECT software) in its fixed assets schedule to the balance sheet. When the assessee was asked to explain, the assessee has declared that assessee company entered into a serve usage agreement with its holding company where the Holding Company had permitted the Indian entity to use its server free of cost during the incubation period. Assessee has accordingly developed the software and later discarded the above software and debited the cost incurred by the assessee company to its holding company to the extent the holding company had reimbursed the cost for developing the above software. For this purpose, assessee has signed Supplementary Agreement with the holding company, which was filed befor....
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....ssing Officer that assessee has provided wrong details and mentioned that the asset is discarded but actually intangible asset was transferred to the Holding company in USA and the same is thereafter accepted by the assessee. Subsequently many documents were called by the Ld. AO from the assessee to verify the valuation of the intangible asset and the documentary proof which support the assessee contention that the intangible asset was commercially unsuccessful. However, assessee has not: provided any cogent supporting documents to take its stand. Therefore, the Ld. AO has made addition under the head Short term Capital gain. 4.2 During the appellant proceeding, the appellant furnished a written submission which find place in para-3 of this order. The appellant company has mentioned that the computer software was commercially unsuccessful and that the holding company was indemnifying the appellant for loss based on its agreement with ii and accordingly cost of development was the fair market value of the said software. 4.3 I have considered the submissions of the appellant and perused the material available on record. At the outset, it is observed that the appellant company h....
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....Holding company? Why the software should not be discarded in the India by the appellant company only? This only proves that there was feasibility and utility of the software, which has helped the holding company for their commercial benefits, that's why the holding company has taken the software from the appellant company. 4.5 In view of above facts and that no further cogent evidences or arguments have been put forth by the appellant during the course of appellate proceedings. It is held that no interference is called for in the decision of assessing officer and accordingly rejected the claim of the appellant company. Hence, addition as Short Term Capital gain is confirmed. The appeal of the assesse on this ground is dismissed. 8. Now before us, the assessee has preferred the appeal by raising the following grounds of appeal as under:- 1. That the order dated 31.1.2020 passed by the Commissioner of Income-tax Appeals ('C1T (A)') u/s 250 of the Income-tax Act, 1961 ("Act") is bad in law and void ab-initio. 2. Thai the C1T (A) erred in confirming the addition of 1NR 1,14,93,520/- as short-term capital gain to the income of the Appellant on account of transfer of t....
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.... premature, therefore this ground of appeal is dismissed. Ground no. 8 is on levy of interest u/s 234B, which is also consequential in nature, therefore this ground of appeal is also dismissed. 10. With regard to ground no. 1 to 6, Ld. AR brought to our notice the findings of AO and para 4 of Ld. CIT(A) and submitted that assessee has developed this software and capitalized the same in its books of accounts. The assessee was receiving support from its holding companies for development of this software and accordingly, assessee has received reimbursement of Rs. 1,27,31,017/-. On evaluation of the software, it was found that the software is commercially not viable, accordingly the software was discarded. Since, the software is not commercially viable, the assessee has forwarded the software to its holding company and accordingly, the software was discarded. Ld. AR objected to the fact that the computer software was discarded at the written down value of the computer software, the cost of the same is only Rs. 1,48,19, 687/-. The value at which the asset Block shows is the capital loss to the assessee. He submitted that Ld. AO proceeded to evaluate the software on the original capital....
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....as reimbursed by the holding company. Therefore, assessee submitted that software is no more commercially viable whether it is discarded by assessee or by the holding company, does not make any difference. 13. After careful perusal of the records and submission made by the parties, we notice that assessee has developed this software and transferred the same to its holding company, certifying it as commercial unviable and whatever the cost received by the assessee from its holding company as the cost of writing off of the software. However, it is not clear whether if there is any commercial value to the software which was transferred to the holding company, at present it may not be commercially viable, but it is not clear whether this software will be of use to its holding company in future. Since assessee has invested lot of labour and invested resources to develop software which is used by the customers of the holding company. We notice from the record that assessee has developed this software and utilized the same in its business and claimed the depreciation as well during this intervening period. Therefore, it clearly indicates that software was utilized in the running of the b....