Law:

Section:

JUDGMENT P.D. Desai, J.-This reference illustrates once again what a bewildering variety of questions arise for consideration under the income-tax law. The question which falls for determination in this reference is rather unusual, namely, whether drawings and patterns received by an assessee from a foreign company under a collaboration agreement can be said to be "plant" on which depreciation is allowable under section 32 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). It is a very debatable question which is not easy of answer and though we have taken one view which appears to us more plausible, the other view is not altogether impossible. The assessee is a public limited company engaged in the manufacture of elevators. The controversy in the present reference arises out of two agreements entered into by the assessee with foreign collaborators. The first is an agreement dated October 5, 1960, entered into by the assessee with Alfred Wiseman & Co. Ltd., Birmingham, and the second is an agreement dated October 7, 1960, entered into by the assessee with Spencer (Melksham) Ltd., Wiltshire. For the purposes of this reference, it would be necessary to set out only such terms of each of the said agreements as have a material bearing on the question under consideration and we proceed to do so. By the first agreement, Alfred Wiseman & Co. Ltd. agreed: (a ) to grant to the assessee full and exclusive licence and authority to manufacture in India the complete range of Wiseman's Worm Reduction Gear Units up to 101/3 size for a period of ten years and, thereafter, until terminated by either giving to the other twelve months' notice in writing to that effect; (b) to supply to the assessee all existing and up-to-date drawings and information (without cost) and patterns (at cost) which might be required by the assessee for the purpose of such manufacture; (c) to train in the production of the Worm Reduction Gear Units of the type and range covered by the agreement two engineers employed by the assessee for a period of six months without charge at their works and also to train additional employees of the assessee during the tenure of the agreement…

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