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Taxability of sale of capital work in progress

Tax queries 3668 views 5 replies

A company has CWIP of Rs.25 lac which is basically related to software. Now the company dont have funds to invest further in CWIP to complete the same and want to sell the same to other company. If other company is ready to buy the same at 40 lac, what would be the tax liabilities on 15 lac received excess. Is it capital receipt or revenue receipt (company is not in the busines of producing software). If it is capital receipt will there be any capital gain tax applicable and if applicable how do we calculate the tax, as company has been spending money on this project for the last 3 years.

Replies (5)

you like to say that you have sell out the plant and machinery installed ( capital goods), 

if depriciation is claimed in earlier years, then it will go under sell of capital goods, and the profit would get tretment as revenue receipt. 

However if depriciation is not availed then there are two slabs, 

1) aquisition more than 36 months, will get Long term capital gain tax ( index benefit may be claimed) 

2) aquisition less than 36 months will get short term capital gain tax (at par with revenue receipts)

Hi, it depends on what business your company is doing and for what purpose the software is being built. Please decide after considerng the facts of the case.

Dear shaji

which type  of your bussiness in software company.

thanks & regards

ramanuj

 

 

The company is in the business of e-commerce, like flipkart. They wanted to develop a software package / app to be used in their business and not for selling it to customers.

" A company has CWIP of Rs.25 lac which is basically related to software. Now the company dont have funds to invest further in CWIP to complete the same and want to sell the same to other company. If other company is ready to buy the same at 40 lac, what would be the tax liabilities on 15 lac received excess. Is it capital receipt or revenue receipt (company is not in the busines of producing software). If it is capital receipt will there be any capital gain tax applicable and if applicable how do we calculate the tax, as company has been spending money on this project for the last 3 years."


 


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