would intellectual property rights such as trademarks, copyrights and know-how come within the definition of ‘plant’ in the ‘sense which people conversant with the subject matter with which the statute is dealing, would attribute to it’?
The Supreme Court opines, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and knowhow is acquisition of a capital nature, more particularly in the case of the assessee. Therefore, it cannot be doubted that so far as the assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of ‘plant’ being commercially necessary and essential as understood by those dealing with direct taxes.
The department is not entitled to rewrite the terms of a commercial agreement.
Section 32 of the Act as it stood at the relevant time did not make any distinction between tangible and intangible assets for the purposes of depreciation. The distinction came in by way of an amendment after the assessment year that we are concerned with. That being the position, the Assessee is entitled to the benefit of depreciation on plant .(that is on trademarks, copyrights and know-how) in terms of Section 32 of the Act as it was at the relevant time.
Conclusion :-Even prior to the insertion of “intangible assets” in Section 32, intellectual property rights such as trademarks, copyrights and know how constitute “plant” for purposes of depreciation.
SUPREME COURT OF INDIA
Mangalore Ganesh Beedi Works vs. CIT
CIVIL APPEAL NOS. 10547-10548 OF 2011
October 15, 2015 (Date of pronouncement)
October 19, 2015 (Date of publication)
AY 1995-96