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2011 (11) TMI 85 - MADRAS HIGH COURTWhether the amounts spent towards purchase of designs and drawings and towards consultancy charge for the purchase of obtaining technical know-how be considered the amounts spent under the provisions of Section 35 AB of the Act or Section 37(1) of the Act ? - Held that:- where the assessee has paid in any previous year any lump sum consideration for acquiring any know-how for use for the purposes of his business, one-sixth of the amount so paid shall be deducted in computing the profits and gain,"know-how" means any industrial information or technique likely to assist in the manufacture. - In the case of CIT Vs. Tamil Nadu Chemical Products Ltd., (2002 -TMI - 12215 - MADRAS High Court). It was held therein 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 and the deduction that was allowable was one-sixth of the amount paid as lump sum consideration for acquiring the know-how. Regarding payment of consultancy charges - Held that:- It is not in dispute that the said sum was incurred for market survey of raw-materials used in the assessee's business. - the said amount paid as consultancy charge cannot be treated as an amount spent in getting know-how or technique likely to assist in the manufacture or processing of goods i.e., augmenting the business of the assessee. - allowed as expenditure u/s 37(1) - Decided in favor of assessee partly.
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