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Issues:
1. Determination of cost of manuals for claiming depreciation and development rebate. 2. Exclusion and valuation of technical know-how components from the manuals. Analysis: The judgment pertains to an income-tax case arising from the assessment year 1971-72, involving the determination of the cost of manuals for claiming depreciation and development rebate. The assessee-company, formed under a collaboration agreement between an Indian firm and a U.S. company, received three manuals containing technical details on catalyst production. Initially, the Tribunal determined the cost of the manuals at Rs. 25,000 and allowed depreciation and development rebate. However, a subsequent court order found the Tribunal's determination arbitrary and directed a reevaluation. The Tribunal, upon reconsideration, allocated Rs. 2,25,000 as the cost of the manuals after deducting costs attributable to various components. The assessee challenged the exclusion and valuation of certain technical know-how components from the manuals. The court examined whether the Tribunal was justified in excluding specific technical know-how components, such as scheme for components of catalysts, quality control tests, and personnel organization, from the manuals' valuation. The Tribunal had determined that the sum paid by the assessee was not solely for the manuals but also for certain rights, including future know-how. The court emphasized the need for a rational basis for ascertaining the cost of the manuals by deducting costs of various components. It noted that while the cost of patent rights was agreed upon, the valuation of other excluded items lacked objective norms and scientific basis. The court found the Tribunal's approach arbitrary and directed a fresh consideration on the exclusion and valuation of the technical know-how components. In conclusion, the court refused to answer the questions referred and directed the Appellate Tribunal to reevaluate the appeal for the assessment year 1971-72, considering the exclusion and valuation of the technical know-how components from the manuals. The judgment highlights the importance of a reasoned and objective approach in determining the cost of technical know-how components for claiming depreciation and development rebate in income-tax assessments.
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