TMI Blog2011 (11) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and towards consultancy charge as the amounts spent for the purchase of obtaining technical know-how and considered the amounts spent under the provisions of Section 35 AB of the Act and accordingly allowed only 1/6 of the amount viz., Rs.4,69,289/- as deduction. Aggrieved by the same, the assessee filed appeal before the Commissioner of Income Tax (Appeals), who, reversed the order of the Assessing Officer and held that the assessee would be entitled for deduction for the entire amount under Section 37(1) of the Act. To arrive at such a conclusion, the First Appellate Authority has held that the sum of Rs.1,00,000/- being the expenditure incurred for market survey of raw-materials used in the assessee's business, it should be allowed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted in computing the profits and gains of the business for that previous year, and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years. Explanation - For the purposes of this section, "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto)." 6. A reading of the said provision makes it clear that the amount paid by the assessee was towards acquiring technical know-how to increase its product range of its business and therefore, 1/6th of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiring 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." 8. Applying the decision above cited, we hold that the payment of the amount of Rs.10,39,195/- made by the assessee to M/s.Graff Sales, Switzerland for the purpose of purchase of designs and drawings attracts Section 35AB of the Act. Accordingly, the findings of both the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal in this regard are set aside. The order of the Assessing Authority is restored. 9. As far as the reliance placed on by the learned counsel for the assessee in the assessee's own case reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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