{"id":5588,"date":"2012-09-11T02:36:36","date_gmt":"2012-09-11T02:36:36","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=5588"},"modified":"2012-09-11T02:36:36","modified_gmt":"2012-09-11T02:36:36","slug":"drilcos-india-pvt-ltd-vs-cit-supreme-court-lumpsum-technical-know-how-fees-are-deductible-only-us-35ab-not-s-371","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/drilcos-india-pvt-ltd-vs-cit-supreme-court-lumpsum-technical-know-how-fees-are-deductible-only-us-35ab-not-s-371\/","title":{"rendered":"Drilcos (India) Pvt. Ltd vs. CIT (Supreme Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (drilcos_tech_knowhow_35AB.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nLumpsum technical know-how fees are deductible only u\/s 35AB & not s. 37(1)
\n<\/strong><\/p>\n

The assessee entered into a “Licence and Technical Assistance Agreement” with an American company pursuant to which the American company agreed to transfer technical know-how to the assessee in consideration of US $2,25,000 to be paid in three installments. The assessee paid the first installment amounting to Rs.17.49 lakhs. Subsequently, disputes arose between the contracting parties and the know-how was not transferred by the American company<\/em>. The assessee claimed that as the technical know-how<\/em> was not received<\/em>, the amount paid was deductible u\/s 37(1)<\/em> and not under s. 35AB. The AO & CIT(A) rejected the claim though the Tribunal upheld it. The High Court<\/a> reversed the Tribunal. On appeal by the assessee to the Supreme Court, HELD dismissing the appeal: <\/p>\n

S. 35AB provides for the amortisation of any lump sum consideration for acquiring any know-how for use for the purposes of his business in 6 installments. Though because of certain disputes which arose between the parties, the balance amount was not paid by the assessee to the American company, the word “for”<\/strong> in s. 35AB, which is a preposition in English grammar, has to be emphasised<\/strong> while interpreting s. 35AB. S. 35AB says that the expenditure should have been incurred for the purposes of the business<\/strong> of the assessee. The Technical Assistance Agreement was entered into between the assessee and the American company for acquiring know-how which was, in turn, to be used in the business of the assessee. Once s. 35AB comes into play, then s. 37 of the Act has no application<\/strong>. <\/p><\/blockquote>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

S. 35AB provides for the amortisation of any lump sum consideration for acquiring any know-how for use for the purposes of his business in 6 installments. Though because of certain disputes which arose between the parties, the balance amount was not paid by the assessee to the American company, the word “for”<\/strong> in s. 35AB, which is a preposition in English grammar, has to be emphasised<\/strong> while interpreting s. 35AB. S. 35AB says that the expenditure should have been incurred for the purposes of the business<\/strong> of the assessee. The Technical Assistance Agreement was entered into between the assessee and the American company for acquiring know-how which was, in turn, to be used in the business of the assessee. Once s. 35AB comes into play, then s. 37 of the Act has no application<\/strong><\/p>\n

Read more ›<\/a><\/div>\n

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