04 四月 2013

Investment allowance eligibility when composite technology used

In a recent order the Delhi High Court took a closer look at technology, its application and treatment of consideration received [Grasim Industries Ltd v. GOI, Order dated 7-3-2013]. 


Claim for higher rate of investment allowance

The issue revolved around denial of higher rate of 35% investment allowance to the assessee who claimed to have used a certain technology to manufacture caustic soda. The respondent had refused to issue the appropriate certificate required under Section 32 (2B) of the Income Tax Act, 1961 to enable the assessee to claim the deduction.

The new technology developed by CECRI, employed Titanium Substrate Insoluble Anodes (TSIA) in the production of caustic soda. The assessee had installed a new electrolyser for this purpose and bought the TSIA from a company which was licensed to manufacture TSIA. The respondent refused to issue certificates stating that this amounted to manufacture by use of indigenous technology, and TSIA was not manufactured using the plant and machinery installed by the assessee.  


Imperfect understanding of composite technology

The assessee contended that the dispute arose from imperfect understanding of the technology. It stated that the technology developed was a composite technology, both for the manufacture of TSIA and for the utilisation of TSIA in the process of manufacture of caustic soda. The company (TEAM) had simultaneously licenced the right to use the said new technology developed by CECRI and also sold TSIA to enable the practical utilization. It was also found that the company charged royalty towards use of technology and price in respect of the anodes sold.    

Granting relief to the assessee, the High Court held that the assessee was entitled to deduction under section 32(2B) for employing new plant and machinery for manufacture or production of caustic soda by using technology or process developed by CECRI.   


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