Law:

Section:

Irrespective of whether it is a capital or revenue expenditure, expenditure incurred for purpose of acquiring know-how required to be treated only in accordance with section 35AB Section 35AB, read with section 37(1), of the Income-tax Act, 1961 - Technical know-how expenditure - Assessment year 1993-94 - Whether irrespective of whether it is a capital or revenue expenditure, expenditure incurred for purpose of acquiring know-how is required to be treated only in accordance with section 35AB and assessee cannot treat amount paid by it for acquiring know-how as an item of revenue expenditure allowable as a deduction under section 37 - Held, yes FACTS The assessee entered into an agreement with a foreign collaborator for acquiring/obtaining technical know-how and payment made to the collaborator was claimed as revenue expenditure. The claim was denied by the assessing authority. The Tribunal, however, allowed the claim of the assessee. On appeal : HELD In CIT v. Tamil Nadu Chemical Products Ltd. [2003] 259 ITR 582/ 129 Taxman 559 (Mad.), the High Court held that irrespective of whether it is a capital or revenue expenditure, the expenditure incurred for the purpose of acquiring know-how was required to be treated only in accordance with section 35AB. Accordingly, the assessee was not entitled to treat the amount paid by it to its collaborator for acquiring know-how as an item of revenue expenditure allowable as a deduction under section 37. That payment was required to be considered only under section 35AB and the deduction that was allowable was one-sixth of the amount as provided in that section. [Paras 4 & 5] CASE REFERRED TO CIT v. Tamil Nadu Chemical Products Ltd. [2003] 259 ITR 582/ 129 Taxman 559 (Mad.) [Para 4]. T. Ravikumar for the Appellant. J. Balachandran for the Respondent. JUDGMENT R. Jayasimha Babu, J. - The assessee made a claim for deduction of a sum of Rs. 17,49,889, which it had paid to its foreign collaborator in terms of the agreement which had been entered into between the parties on June 7, 1990. The payment was made during the previous year relevant to the assessment year 1993-94. That payment was for the purpose of obtaining transfer…

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