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TMI Blog1982 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... of the three manuals at Rs. 25,000 ? " The facts which give rise to these questions are these : The assesseecompany was floated as a result of a collaboration agreement between A. Laljee Sons Company (referred to in this judgment as " Laljee "), firm in India and Catalysts and Chemicals Inc. (for brief referred to as " CCI " in this judgment), a company in the U.S.A, It was for producing catalysts that the collaboration agreement was reached and this had been approved by the Govt. of India in principle. Annexure A is the agreement between A. Laljee Sons Company and CCI. The CCI in the States was to provide the company with the overall technical know-how. Since the relative clause is relevant for the purpose of this reference it is useful to extract that clause: " 2. (b) At the time the shares are offered for subscription, CCI shall deliver to the company such equipment as can only be obtained outside India and having a value equal to U.S. $ 1,05,000 and being the sum equivalent to the par value of 7,875 shares of Rs. 100. At the same time, the company shall further issue to CCI 1,500 shares as fully paid up shares of a par value of 1,50,000 rupees (representing the rupee e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof may be disclosed to other persons. For the assessment year 1971-72, the corresponding accounting year for which was that ending on December 31, 1970, the assessee-company filed a return showing a net loss of Rs. 21.03 lakhs. In arriving at this loss an amount of 15% on the sum of Rs. 18.75 lakhs paid to CCI by the assessee-company under the terms of the contract was claimed by way of development rebate and depreciation. The case of the assessee was that the above said amount of Rs. 18.75 lakhs represented the value of books containing technical know-how and books being " plants " within the meaning of s. 43(3) of the I.T. Act, development rebate and depreciation could be claimed thereon. The ITO did not agree with this. He was of the opinion that technical know-how was not a tangible asset within the meaning of s. 33 of the I.T. Act and so the claim was not admissible. Before the AAC it was argued that Rs. 18,75,000 represented the value of the technical know-how purchased by the appellant and that the technical know-how was in the shape of books. But the AAC felt that what were acquired were not books, but a valuable right covering the right to patents, processes and tradem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of Rs. 18.75 lakhs could be considered as the cost of the three manuals. It determined the cost of these books at Rs. 25,000 and allowed depreciation and development rebate thereon. Evidently, the question raised at the instance of the department challenges the view taken by the Tribunal that the three manuals handed over by the CCI to the assessee-company were books. There is also a challenge at the instance of the department to the fixation of the value of the books at Rs. 25,000. There is a similar challenge at the instance of the assessee that the value of the books should not have been fixed at Rs. 25,000. That is the purport of the second question. We will now consider the first of the two questions referred, namely, that referred at the instance of the department. Section 43 of the I.T. Act defines certain terms and one of the terms so defined is that in s. 43(3), namely, " plant ". According to the definition "plant " includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business or profession. Books would fall within the definition of " plant " provided they satisfy the qualification that they are " tools " of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 18.75 lakhs was the content of the three books and as such the cost of the books should be found as Rs. 18.75 lakhs. We are afraid such an argument cannot be accepted for more than one reason. The agreement itself indicates that besides the passing on of the technical know-how the return for the sum of Rs. 18.75 lakhs covered the patent rights as well as the trade-mark rights. Besides these, there was an obligation to pass on additional technical know-how, which the CCI came into possession of, during the period of 5 years. There was also an obligation to train personnel from India in the States, of course, at the assessee's expense and also by sending technical personnel to India, that too at the assessee's expense. It was not as if once the three books were handed over, the CCI could say " we have given you, what you bargained for. You shall not expect anything more from us. We have discharged our obligation under the agreement. You cannot legally enforce any further obligation against us. " That of course is plainly not the case under the terms of the agreement. Even the additional grounds of appeal before the Income-tax Appellate Tribunal indicate that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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