1980 (3) TMI 39 - HC - Income Tax

Summary

Issues involved: Whether technical know-how in the form of blue prints, instructions, manuals, etc., would fall within the definition of 'plant' u/s 43(3) for the purpose of allowing depreciation and development rebate.

Summary:
The assessee entered into an agreement with a foreign collaborator and paid amounts for technical know-how. The ITO disallowed depreciation and development rebate, but the AAC allowed it. The Tribunal, following a Gujarat High Court decision, held that the assessee is entitled to depreciation and development rebate on the technical know-how. The revenue contended that know-how is an intangible asset and no depreciation should be allowed. However, the Gujarat High Court held that know-how, in physical form like blue prints, falls under the definition of 'plant' u/s 32. The Karnataka High Court also supported this view, stating that technical data necessary for business constitutes 'plant'. In the present case, the technical know-how provided to the assessee in the form of blue prints, instructions, etc., constitutes 'plant' for allowing depreciation u/s 32. The court answered the question in favor of the assessee, following the precedent set by the Gujarat High Court and other High Courts.

This judgment clarifies that technical know-how, when in physical form like blue prints, instructions, etc., constitutes 'plant' for the purpose of allowing depreciation u/s 32. The decision is based on the interpretation of the definition of 'plant' and the necessity of technical knowledge for conducting business operations. The court's ruling aligns with previous decisions by various High Courts, establishing a consistent legal precedent regarding the treatment of technical know-how as a depreciable asset.