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TMI Blog2001 (8) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign companies for technical know-how in the form of designs, drawings, etc., in respect of certain machines manufactured by it. In respect of the above amounts paid towards technical know-how, the assessee-company claimed depreciation, which was disallowed by the Assessing Officer for all the assessment years in question. On appeal, the Appellate Assistant Commissioner accepted the claim of the assessee. However, subsequently, the Assessing Officer brought to the notice of the Appellate Assistant Commissioner that the assessee is not entitled for the relief in the light of the judgment of this court in R. C. No. 21 of 1971, dated January 17, 1973. When this fact was brought to the notice of the Appellate Assistant Commissioner, who passed the orders in appeal on January 31, 1975, rectified the same under section 154 of the Act, as there was a mistake apparent from the record and disallowed the depreciation originally allowed. The said order, under which the relief granted to the assessee was withdrawn, was appealed to the Income-tax Appellate Tribunal. Before the Income-tax Appellate Tribunal, the assessee contended that the issue could not be considered as an apparent mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Appellate Assistant Commissioner under section 154, but on the merits of the issue in the light of the subsequent decision of the Supreme Court, wherein it was held that technical know-how such as drawings, designs, plans, processing data, etc., can be treated as "book" and constituted plant within the terms of section 43(3) of the Act. In the light of the said later decision of the apex court on the merits of the matter, this court need not go into the other technical aspects and therefore instead of answering the question in favour of the Revenue and directing the parties to re-agitate the issue on the merits, the issue could as well be answered in favour of the assessee on the merits of the matter. Learned counsel did not seriously contest the finding of the Appellate Tribunal in so far as the powers of the Appellate Assistant Commissioner in rectifying the order, when a binding decision of the jurisdictional High Court is brought to his notice, which he failed to consider while disposing of the appeals originally. Heard both sides and considered the material on record. The merits of the matter relate to whether the technical know-how, viz., drawings, plans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der for refund be made. But the Income-tax Officer declined to accede to the request of the assessee by his order dated November 2, 1957. According to the Assessing Officer, the assessment was completed long back before the judgment of the Bombay High Court in the case of Khatau Makanji Spinning and Weaving Co. Ltd. [1956] 30 ITR 841. Against the said order, the assessee-company preferred a revision unsuccessfully before the Commissioner of Income-tax and therefore, approached the Bombay High Court on the original side under article 226 of the Constitution for a direction to the Income-tax Officer to revise the order dated November 2, 1957, and seeking refund of the amount. The High Court allowed the said application. Thereafter, the matter was taken in appeal to the apex court. The apex court upheld the view of the High Court, observing as under: "There is no doubt that, in view of the judgment of this court in CIT v. Khatau Makanji Spinning and Weaving Co. Ltd. [1960] 40 ITR 189, the levy of an additional tax was illegal. It was urged, however, before the High Court that no application for rectification under section 35 of the Income-tax Act was presented by the respondent-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of Rs.80,000 in each case, to supply to the assessee all technical know-how required for the manufacture of those instruments. Pursuant to the agreements, the assessee made full payment of Rs.1,60,000 and claimed depreciation in respect of those payments. The claim was rejected by the Tribunal on the ground that the supply of designs, etc., was only incidental to or in furtherance of other services, without going into the question, whether the documents fell within the meaning of the expression "book". On a reference, the High Court held that the documentation service was incidental to the other services and the entire sum of Rs.1,60,000 was capital expenditure but what was brought into existence was a non-depreciable asset and the appellant was not entitled to any relief. On appeal, the apex court accepting the claim of the assessee held: "(i) That, reading clauses 3 and 6(a) together, it was clear that rendition of documentation service was really the main service to be rendered by the foreign collaborator. (ii) That the various documents such as drawings, designs, charts, plans, processing data and other literature included in documentation service, the supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of drawings, designs, charts, plans, processing data and other literature, fell within the definition of 'plant' and was, therefore, a depreciable asset." In the light of the above judgment of the apex court, the documents in question that are supplied under various collaboration agreements, would constitute "plant" for the purpose of depreciation. In the light of the said finding, the assessee is entitled for depreciation. Therefore, the rectification made by the Appellate Assistant Commissioner disallowing the depreciation originally granted is not in accordance with law laid down by the apex court. Though at the time when the order was passed it may be in accordance with the decision of the jurisdictional High Court, but in view of the subsequent decision of the apex court, the assessee is entitled for depreciation and the rectification order passed by the Appellate Assistant Commissioner is not in accordance with law. Under the above circumstances, though not for the same reasons considered by the Income-tax Appellate Tribunal, but for the subsequent decision rendered by the apex court on the merits of the matter, we answer the question against the Revenue and in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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