is there any capital gain on sell of software?

Tax queries 905 views 5 replies

is there any capital gain on sell of software? if yes then benefit of indexed cost is available or not?

Replies (5)

Dear Hitansh,

The Definition of Capital asset says that it doesn't include "Stock" - Therefore if Software constitute as "stock" then No capital Gain will arise...

Now if it is a capital asset then, yes if sold after holding it for more than 36 months, benefit of indexed cost can be taken...

I am not clear with your question. But will answer with the follwoing assumptions

1. The Company is in the business of Rendering Software services.


No capital gains, it is a simple income from Business.

 

2. The company is not engaged in the business of software and has

a) Purchased a Software for the use in business

b) Created its own software and is now selling the software

In both the cases the Purchase Cost / Cost of building the software would have treated as Intangible asset and depreciation would have been allowed under Section 32 at a rate of 25% WDV method.

 

Now, if you are receiving any money towards sale of these softwares, then the amount will be reduced from the depreciation block and the tax treatment will be as follows

  Entire Block is Sold Entire Block is Not Sold
Amount Received > WDV of the Block Short - Term Capital gain Short - Term Capital gain
Amount Received < WDV of the Block Short - Term Capital Loss The Block continues to exist and depreciation can be claimed on the balance amount at 25%

In the above cases there will be no Indexation Benefit.

 

If your case is different from that of the above, can you please elaborate it.

 

Shiva

Dear Shiva

U r rite, I didn't mention in my post above the posiibility of being an asset on which Depreciation is claimed...

Thanks 4 reminding that possibility

Originally posted by : Amir

Dear Shiva

U r rite, I didn't mention in my post above the posiibility of being an asset on which Depreciation is claimed...

Thanks 4 reminding that possibility

You are welcome sir.

thank s alot ......


CCI Pro

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