Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2006 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2006 (12) TMI 191 - AT - Income TaxExpenditure incurred for acquiring licence - ''Capital Or Revenue'' - Licence fees paid on account of user of computer software programme - installation of R/3 software, ERP package - whether R/3 software was an 'intangible asset' within the meaning of clause (ii) of section 32(1) - It is seen that the decision of the Bombay High Court in the case of Premier Automobiles Ltd.[1993 (4) TMI 31 - BOMBAY HIGH COURT] was taken into consideration by the Rajasthan High Court in the case of Arawali Constructions Co. (P.) Ltd.[2002 (7) TMI 41 - RAJASTHAN HIGH COURT] with regard to the second part of its decision, namely, that the expenditure incurred for acquiring technical know-how was capital expenditure and was eligible for depreciation u/s 32 of the Act. The decision of the Bombay High Court was silent, insofar as the first part of the decision of the Rajasthan High Court, namely, that the purchase of computer software amounted to acquisition of technical know-how. It is this part of the decision of the Rajasthan High Court which is relevant for deciding the issue in this case. The expressions 'a know-how', 'a patent', 'a copyright' and 'a trademark,' are examples of 'intellectual property' and are included in clause (ii) of section 32(1) as 'intangible assets'. The aforesaid 'intellectual properties', or a licence acquired in respect of such a property, are all 'intangible assets' under clause (ii) of section 32(1). Therefore, taking guidance from the decision of the Rajasthan High Court, we are of the view the impugned R/3 software has to be treated as an 'intangible asset' within the meaning of clause (ii) of section 32(1) of the Act. And, consequently, a licence acquired by the assessee to use the same will also come within the ambit of clause (ii) of section 32(1). Therefore, we hold that, on the facts of the present case, the expenditure incurred for acquiring the impugned licence, was rightly treated by the Assessing Officer and the CIT(A) as capital expenditure, eligible for depreciation u/s 32(1). In the result, the appeal filed by the assessee is partly allowed.
|