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technical know how

CVREDDY (ACCOUNTANT) (51 Points)

30 October 2009

i wish to know what is technical know how. it it asset or expenditure? if asset how much depreciation percentage in companies act and income tax act.

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GAURAV BEHL (CA-FINAL ) (228 Points)
Replied 30 October 2009

technical know how means the knowledge to do a job.. if you pay someone for technical knowhow then it is in the nature of payment for consultancy and it is purely an expense...not an asset.. hope your doubt is cleared..

Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 30 October 2009

A straight forward judjement cannot be give that whether Technical Know-How is an Asset or an Expenditure.

First of all, technical know-how is an intellectual property right which is nothing but the techincal knowledge for carrying out any process and such knowledge is available with some specific people who have the know-how patented.

Now, whether to classify it as asset or expenditure depends upon the nature of transaction. If you pay for the technical know-how on consultancy basis then it shall be classified as revenue. In case you purchase the technical know-how from the person having it say for a period of 10 years, then it shall be classified as Intangible Asset. Depreciation is available under Income Tax Act @ 25% on WDV method for such assets.