Law:

Section:

section 37(1) of the income-tax act, 1961-capital or revenue expenditure-assessee-company entered into agreements with a foreign company for undertaking manufacture of microscopes and theodolites under which foreign collaborator had to render 'documentation service' by supplying to assessee up-to-date and complete sets of documents such as manufacturing, drawings, processing documents, designs, charts, plans and other literature as specified in said agreements in consideration for certain lump sum payment-there was also a provision enjoining foreign collaborator to render training and to impart knowledge of know-how technique and perform certain other services as and when desired by assessee for which assessee had agreed to pay expenses separately-whether said documentation service could be said to be principal service for which stipulated payment was mainly made by assessee as a result whereof assessee acquired all technical know-how requisite for purpose of manufacturing said instruments and, therefore, said payment was of capital nature-held, on facts, yes section 43(3), read with section 32, of the income-tax act, 1961-plant-whether capital asset like technical know-how acquired in shape of drawings, designs, charts, plans, processing data and other literature which formed basis for business of manufacturing certain instruments would fall within definition of 'plant' given in section 43(3) so as to entitle it to depreciation on expenditure incurred for acquisition of same-held, yes Facts The assessee-company entered into agreements with a foreign company for undertaking the manufacture of microscopes and theodolites, under which the foreign collaborator, in considera- tion of certain payment agreed to supply to the assessee all the technical know-how required for the manufacture of these instruments. The assessee acquired the right to manufacture in India the said instruments under its own trade mark and name but under the licence of the foreign supplier and the right to sell the same in India. To enable the assessee to manufacture these instruments, the foreign collaborator,inter alia, agreed to render 'documentation service' by supplying to the assessee…

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