Landis + Gyr Limited Vs DCIT (ITAT Kolkata)
In the case of Landis + Gyr Limited vs. DCIT [ITA no. 37/Kol/2012 dated 03-08-2016], the assessee entered into a Business Transfer Agreement to acquire the business of TECRES. Pursuant to the agreement, the entire TECRES team, along with developed codes, domain repository, and other intellectual property including designs, software, database, technical knowhow, process knowhow, R&D material, and manuals, joined the assessee. The assessee contended that the acquired knowhow is an independent intangible asset covered u/s 32(1)(ii) of the Act and not required to be registered with the Government to qualify for depreciation. While placing the reliance on OECD TP guidelines and judicial precedents including Smifs Securities Ltd. (348 ITR 302) the assessee argued that knowhow and trade secrets are valid intangible assets eligible for depreciation, even if not recorded in the books or formally registered.
The AO disallowed the claim, on the grounds that the assets acquired do not fall within the categories mentioned in the Income Tax Rules, and that such intangible assets must possess some official recognition or certification. The DRP upheld the AO’s view, reasoning that the knowhow was not registered with any Government authority and hence lacked legal recognition as an intangible asset.
