Law:

Section:

Section 80J of the Income-tax Act, 1961, read with rule 19A(2) of the Income-tax Rules, 1962 - Deductions - Profits & gains from newly established industrial undertakings - Assessment years 1970-71 and 1971-72 - Assessee, an industrial undertaking, purchased technical know-how from its foreign collaborators for a sum of Rs. 14,34,000 and created an asset in balance sheet representing said amount in name of technical know-how - ITO on agreed basis allowed depreciation only on an amount of Rs. 7,17,000 representing 50 per cent of total sum of Rs. 14,34,000 - Whether remaining amount of Rs. 7,17,000 in respect of which no depreciation or development rebate was allowed was also includible in capital of assessee for purpose of computation of relief under section 80J under rule 19A(2)(ii) - Held, yes. FACTS The assessee, an industrial undertaking, purchased technical know-how from its foreign collaborators for a sum of Rs. 14,34,000 and created an asset in the balance sheet representing the said amount in the name of technical know-how. The ITO on agreed basis allowed depreciation only on an amount of Rs. 7,17,000 representing 50 per cent of total sum of Rs. 14,34,000. Further, the ITO dealing with the assessee's claim for deduction under section 80J in respect of the amount of Rs. 14,34,000 held that the amount of Rs. 7,17,000 in respect of which no depreciation or development rebate was allowed did not represent an asset the value of which should not be included in the capital computation. On appeal, the AAC held that the said amount of Rs. 7,17,000 was includible in the capital for the purposes of computation of relief under section 80J and under rule 19A(2)(ii). On further appeal, the Tribunal upheld the order of the AAC. On reference: HELD There was no dispute between the parties that the entire sum of Rs. 14,34,000 appeared as an asset in the books of the assessee under the head 'Technical know-how'. In the circumstances, to the extent the part of the aforesaid amount represented an asset on which depreciation was allowed or allowable, the value of the asset was includible under rule 19A(2)(ii) and to the extent the value of asset on which no depreciation…

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