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TMI Blog2021 (2) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 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 business of the assessee vis- -vis holding company. Since, there is not record submitted by the assessee or its holding company that the software under consideration is completely discarded. In our considered view, the software which was transferred to the holding company which was used by the assessee in its business, the actual cost of the software was ₹ 2,01,87,114/- and assessee has used the above software in its business and claimed depreciation Cost of the assets Relevace at the time of writing off of the assets in the books of the assessee - The written down value of the assets at the time of writing off of the assets was ₹ 1,27,31,017/-. Since this assets was developed by the assessee and utilized by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 before AO. 5. After considering the submission of the assessee, AO rejected the submissions of the assessee and proceeded the issue with FT TR authorities and collected the information with regard to opening and closing balances in the books of accounts of holding companies. AO observed that on verification of the details and information as supplied by the USA authorities, it is observed that the Ledger account of the assessee company in its books and Ledger account of the Holding Company in the books of assessee company both indicated identical closing balance of ₹ 15.,00,159/-, thereby meaning that the asset was taken over into the books of holding company. When the show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly 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 has not cooperated with the Assessing Officer for providing true and fair particulars and the relevant documentary evidences. Further, it is observed that the appellant company has provided wrong information to the Ld. AO in respect to the computer software that the software had discarded instead of transferred to the Holding company at USA of the appellant company. This clearly questions the genuineness of the contention and the documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 the 'CONNET computer software by the Appellate to its holding company. My Personal Health Record E-xpress (USA) ( MPHR US ). 3. The CIT (A) erred in not appreciating that the computer software was transferred to MPHR US at its book written down value being 1NR 1,27,31,017/-, which was less than the tax written down value of the computer software being INK 1,48,19,687/-, and thus the value at which the blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts books of accounts. The assessee was receiving support from its holding companies for development of this software and accordingly, assessee has received reimbursement of ₹ 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 ₹ 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 capitalized cost to the assessee i.e. ₹ 2,01,87,114/- and calculated a premium of 20% on ad-hoc basis and treated the total value of ₹ 2,42,24,537/- as the cost of the assets and reduced the cost of reimbursement received by the assessee from its holding company and balance treated as company s profit. He objected to the method adopted by AO and submitted that what is relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 business of the assessee vis- -vis holding company. Since, there is not record submitted by the assessee or its holding company that the software under consideration is completely discarded. In our considered view, the software which was transferred to the holding company which was used by the assessee in its business, the actual cost of the software was ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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