1982 (12) TMI 5 - HC - Income Tax

Summary

Issues:
- Whether depreciation is admissible on the sum paid by the assessee to M/s. Metrimpex Hungarian Trading Company for the acquisition of a library for the assessment year 1973-74?

Analysis:
The High Court of Andhra Pradesh was tasked with determining whether depreciation is allowable on the amount paid by the assessee to M/s. Metrimpex Hungarian Trading Company for acquiring technical know-how. The Tribunal and other authorities had denied the claim for depreciation, citing a previous judgment that seemingly negated such claims. The assessee argued that the previous decision did not address the specific issue at hand and should not be considered conclusive. The court reviewed the collaboration agreements between the parties, which involved the supply of technical know-how for manufacturing instruments. The court noted that the expenditure in question resulted in an asset of enduring benefit to the assessee, categorizing it as capital expenditure. Despite the authorities relying on certain observations to deny depreciation, the court held that the technical know-how acquired constituted a depreciable asset under Section 32 of the Income Tax Act. The court referenced previous decisions by various High Courts, establishing that know-how qualifies as a "plant" eligible for depreciation. Consequently, the court ruled in favor of the assessee, allowing depreciation on the amount paid for acquiring technical know-how.

In conclusion, the court answered the referred question in the affirmative, supporting the assessee's entitlement to depreciation on the sum paid to M/s. Metrimpex Hungarian Trading Company. The judgment emphasized that the technical know-how acquired by the assessee constituted a depreciable asset, aligning with precedents set by other High Courts in the country. The decision overturned the authorities' denial of depreciation and affirmed the assessee's right to claim depreciation under Section 32 of the Income Tax Act.