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TMI Blog2011 (11) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs is an allowable expenditure under Section 37(1) of the Act or for deduction under Section 35 AB of the Act?" 2. The assessment year herein relates to 1990-91. The assessee is stated to have paid Rs.11,39,195/- for purchase of designs and drawings. Out of the said amount, Rs.10,39,195/- was paid to M/s.Graff Sales, Switzerland for getting the designs and drawings for manufacture of opening roller, while the remaining amount of Rs.1,00,000/- was paid to M/s.Indranil Consultants, Bombay as a consultancy charge. The assessee claimed deduction of the entire amount of Rs.11,39,195/- under Section 37(1) of the Income Tax Act, 1961 (hereinafter called as the "Act"). 3. The Assessing Officer while considering the amounts spent towards purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) came to be confirmed by the Income Tax Appellate Tribunal. As against the same, the Revenue has filed the present appeal. 5. On a reference to the impugned order of the Tribunal, we find that for arriving at the conclusion in granting deduction under Section 37(1) of the Act, the reasons assigned by the Tribunal are not in accordance with law. In fact, the Tribunal has not even chosen to consider Section 35 AB of the Act and the Explanation annexed therein. For better understanding, Section 35AB is extracted as under:- "35AB(1) Subject to the provisions of sub-section (2), 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 amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now-how. However, rightly, the Assessing Authority held that the said amount was spent only in respect of acquiring technical know-how for increasing its product range of its business. 7. Under similar circumstances, this Court in the case of Commissioner of Income Tax Vs. Drilcos (India) Pvt. Ltd reported in (2004) 266 ITR 12, held that any expenditure incurred for acquiring know-how has to be treated in accordance with Section 35 AB of the Act. Further this Court had observed as under:- " This court had occasion to consider Section 35AB in the case of CIT Vs. Tamil Nadu Chemical Products Ltd., (2003) 259 ITR 582. It was held therein that "irrespective of whether it is a capital or revenue expenditure", the expenditure incurred for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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