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2015 (5) TMI 8 - HC - Income TaxTechnical know-how - whether be allowed as expenditure under Section 35AB or Section 37 - whether Tribunal erred in not holding that deduction contemplated under Section 35 AB is only in respect of a capital nature and the deduction of a revenue nature is allowable under Section 37(1)? - Held that:- The reading of Section 37 of the Act makes it more clear that any expenditure not being expenditure of the capital nature described in Sections 30 to 36 shall be allowed in computing the income chargeable under the heads "profits and gains in the business or profession". It means that Section 35AB is applicable only if the expenditure is in the nature of capital expenditure. Though the Commissioner of Income Tax (Appeals) has held that the expenditure incurred by the assessee is revenue in nature, falling under Section 37 of the Act, the Tribunal failed to appreciate the same in the right perspective and has come to a conclusion that Section 35AB being a specific Provision for technical know, general Provision of Section 37 of the Act is not applicable, which is not sustainable, in view of the judgments discussed above and in terms of the contract. We are thus to allow this appeal for two reasons. Firstly, there is no 'acquisition' of technical know-how as contemplated under Section 35AB of the Act, and secondly, Section 35AB would not apply to a revenue expenditure. As discussed earlier, judgment of the Apex Court in Drilcos (India) (2012 (9) TMI 299 - SUPREME COURT) is distinguishable and not applicable to the facts of the case and the later judgment of the Apex Court rendered in the case of Swaraj Engines (2008 (5) TMI 257 - SUPREME COURT) is squarely applicable to the facts of the case. Allow this appeal by setting aside the order of the Tribunal holding that the expenditure incurred by the assessee towards the procurement of technical know how by paying a lumpsum consideration for use in the course of business is a revenue expenditure falling u./s 37 of the Act and the provisions of Section 35 AB of the Act are not applicable to the present case. - Decided in favour of the assessee
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