Law:

Section:

Section 35AB of the Income-tax Act, 1961 - Technical know-how expenditure - Assessee had started a computer training centre in collaboration with NIIT - Pursuant to agreement, assessee paid certain sum as technical know-how fee to NIIT for getting technical assistance from NIIT and claimed deduction of same - Assessing Officer invoking Explanation to section 35AB treated expenditure as capital expenditure - Whether since assessee was utilizing said technical know-how for imparting training in computer operation for coaching students which was neither manufacture nor processing of goods, Explanation to section 35AB was not applicable and entire expenditure could not be treated as capital expenditure - Held, yes FACTS The assessee had started a computer training centre in collaboration with NIIT. Pursuant to agreement, the assessee paid certain sum as a technical know-how fee to NIIT for getting technical assistance from NIIT, and claimed deduction of same. The Assessing Officer invoking Explanation to section 35AB treated expenditure as capital expenditure and added the amount to the total income. On appeal, the Commissioner (Appeals) allowed the assessee's claim. Further, the Tribunal held that the investment of the said amount could not be treated to be a capital expenditure and activities of the assessee did not come within the purview of the Explanation to section 35AB. On appeal : HELD Keeping in view the Explanation to section 35AB, if the activities of the assessee were taken into account, then the assessing authority would not have held in his assessment order that the information which was received was likely to assist in the manufacturing or processing of goods or in the working of a mine, oil well or other sources of mineral deposits, etc. The Assessing Officer in his order of assessment had taken into account the activities which were carried out by the assessee. The said activities had also been considered by the Commissioner (Appeals) and it was concluded that NIIT provided basic software and also trained its teachers who ultimately were responsible for coaching the students enrolled in its colleges and section 35AB was not applicable. That aspect…

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