1983 (6) TMI 37 - AT - Income Tax

Summary

Issues:
1. Claim of depreciation and extra shift allowance on technical know-how contained in book form for Dextrose plant.

Analysis:
The judgment addresses the controversy surrounding the claim for depreciation and extra shift allowance (ESA) on technical know-how in book form used for a Dextrose plant. The Tribunal upheld the claim for depreciation based on a precedent set by the Gujarat High Court in a similar case. However, the issue of ESA was disputed. The Commissioner (Appeals) allowed the claim for ESA, stating that the know-how in the book was integral to the operation of the plant and should be considered part of the plant itself. The ESA was deemed admissible based on the rules relating to ESA and the continuous use of the knowledge contained in the book during all shifts.

The Revenue appealed the decision, arguing that technical know-how in book form should not be eligible for ESA as it is not akin to machinery or plant used for extra shifts. The Revenue contended that the book is not always in use when the plant operates, therefore ESA should not apply. Conversely, the assessee's representative supported the Commissioner (Appeals) decision, emphasizing that the know-how in the book is continuously utilized during plant operations, justifying the claim for ESA.

The Tribunal, after considering the arguments, referred to the Elecon Engg. Co. Ltd. case and acknowledged that technical know-how in book form qualifies as a plant for depreciation purposes. However, the Tribunal disagreed with the Commissioner (Appeals) regarding the eligibility of ESA for the technical know-how in book form. The Tribunal highlighted that while the book form of know-how is considered a plant for depreciation, it does not undergo wear and tear like machinery or plant, making it ineligible for ESA. The concept of obsolescence due to technological advancements was distinguished from wear and tear, indicating that the technical know-how in book form does not align with the criteria for ESA. Consequently, the Tribunal reversed the decision of the Commissioner (Appeals) and reinstated the decision of the Income Tax Officer.

In conclusion, the appeal was partly allowed, with the Tribunal upholding the claim for depreciation on technical know-how but denying the claim for ESA on the same technical know-how in book form used for the Dextrose plant.