DECIDED BY: ITAT, COCHIN BENCH, COCHIN, IN THE CASE OF: ACIT Vs. Malayala Manorama Co. Ltd., APPEAL NO: ITA NO. 323/Coch/2007, DECIDED ON JULY 10, 2009
13. We heard both sides in detail. Section 32 (l)(ii) provides for depreciation on intangible assets acquired on or after the 1st day of April, 1998. Clause (ii) of sub section (1) of section 32 explains the nature of intangible assets as know how, patents, copy rights., trade mark, licenses, franchise or any other business or commercial rights of similar nature being intangible assets acquired on or after the first day of April, 1998.
14. A reading of the provisions of law contained in section 32(1)(ii) provides that the intangible assets entitled for depreciation are specific set of asset/ rights of similar nature. In addition to that, the intangible assets must be acquired by an assessee either in full Ownership or partial ownership. In furtherance of the main provisions of law contained in section 32(l)(ii), Explanation 3 again throws light on the concept of intangible assets While explaining the expressions “assets” and “block of assets’, the explanation has detailed the nature pf intangible assets again as know how, patents, copy rights, trade marks, licenses, franchises or any other business or commercial rights of similar nature. The assessee is emphasizing on the expression “licenses”, “business of commercial rights”. But it is to be seen that the license or any other business or commercial rights must be of similar nature. What is similar in nature? It is the license or any other business or commercial rights of that nature similar to know how, patents, copyrights, trade marks, and franchises. The expressions licenses and business pr commercial rights are found in the company of expressions like know how, patents, copyrights, trademarks, franchises. If one applies the principle of statutory interpretation of ejusdum generis, the expressions ” licenses and business or commercial rights” ‘have to be read in the company of the preceding expressions such as know how, patents, copyrights, trade marks, etc.
15. The know how, patents, copy rights, trade marks, etc. do not have any nexus with a premises being taken on lease, license or rent for running the office of an assessee. Know-how means as provided under Explanation 4 to section 32(1), any industrial information or technic likely to assist in the manufacture or processing of goods etc. So it is to be seen that know-how is an intangible asset in the nature of technical knowledge capable of exploiting for. commercial or industrial purposes. It is necessary to have the know how of producing a particular article or thing. Even though it is intangible, that know-how has an identity and commercial value as that know-how is essential for manufacturing or producing a particular article or thing. It is not in the nature of a license, which provides an assessee a right to use a portion of a building as its office. It has nothing to do with acquiring of tenancy right. This is the case also of the expressions like patents, copyrights, trade marks etc. They are recognized as commercial and industrial rights that are very much connected with carrying on of business. An assessee can run its office either in building (a) or (b) or (c) but if it wants to enter into a particular business, it will have to acquire a particular patent or copy right or trade mark as the case may be. Sq even by any distant imagination, it is impossible to presume that expression licence, provided in section 32(l)(ii) is an endless expression and even a tenancy right can be brought under it. Expressions licence and business or commercial rights appearing in the (company of know how patents, copy rights, trade marks, etc. cannot be singled out and imputed with a different meaning.
16. Ejusdum generis is the rule of generic word following more specific ones. The rule is that when general words follow specific words of the same nature, the general words must be confined to the same kind as those specified. The specific words must form a distinct genesis or category. This rule reflects an attempt to reconcile incompatibility between specific and general words. The specific words provided in section 32(l)(ii) conform a distinct genesis or category in as much as all those expressions relate to exploitable know-how patents, copy rights, trade marks, etc. which are always acclaimed as business and commercial properties. In such circumstances, the expressions licence and I business or commercial rights also should be read along with the meaning of those specific words forming themselves into a special category. If this principle of interpretation is rightly applied in the present case, the agreement of the assessee to acquire a rented property fair running its office cannot be considered as an intangible asset simUac to know how, patents, copy rights, trade marks, etc under section 32(1)(ii). Therefore, we are unable to subscribe to the arguments advanced by the learned Chartered Accountant that the expression licenses and business or commercial rights should be given an endless meaning not necessarily similar to the meaning of the expressions like, know-how patents, copy rights, trade marks, etc. Therefore, it is certain that the meaning of the expression licenses and business or commercial rights reflected in section 32(1)(ii) should be similar to know-how, patents, copy rights, trade marks, etc. The tenancy right acquired by the assessee in the present case is no-where near to section 32(1)(ii).