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TMI Blog2012 (4) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the ITAT is right in allowing deduction of payment in respect of technical know-how under Section Section 37 while holding Section 35AB is not applicable; (D) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in directing the AO to exclude debenture issue expenses in connection with debenture and recompute the deduction under Section 35D; (E) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in allowing expenses on electricity and water charges in respect of the property owned by assessee company given to Directors for residential purpose and holding only perquisites value can be assessed in the hands of Directors; (F) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in allowing the actual premium paid in redemption of debentures as revenue expenditure; (G) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in allowing relief in respect of disallowance under Rule 6B; (H) Whether on the facts and in the circumstances of the case and in law, the ITAT is right in deleting the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts would be in order. The assessee entered into two agreements with two Italian companies viz. M/s. Marzotto & Figli and M/s. Fratalli Piacenza. The first agreement of 24 May 1993 provided that the foreign company would carry out a survey of the existing facilities of the assessee and submit a detailed study report complete with a firm offer for the consultancy services indicating the strength/weakness of the existing facilities, areas of possible cooperation, guarantees of performance of the assessee and estimation in respect of the investment for the purchase of new equipments. In respect of this agreement the assessee was liable to pay an amount of US $ 2,00,000/- on submission of a detailed study report. In the event that a collaboration agreement was subsequently entered into, this payment was to be treated as a part of the total consideration payable under the collaboration agreement. A collaboration agreement was entered into on 25 June 1994 for which a total consideration of US $ 10,00,000/- was payable in three equal installments. The first payment was on signing of the agreement, the second on handing over of technical documentation and the final on the satisfacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was, therefore, a lump sum within the meaning of Section 35AB. The order of the CIT(A) has been confirmed in appeal by the Tribunal. 9. Section 35AB, inter alia, provides that where the assessee has paid in the previous year relevant to the Assessment year commencing on or before 1 April 1998 any lump sum consideration for acquiring any knowhow for use for the purpose of his business, one-sixth of the amount so paid shall be 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. Under the Explanation to Section 35AB, "know-how", inter alia, means any industrial information or technique likely to assist in the manufacture or processing of goods. 10. Now so far as the first agreement dated 24 May 1993 is concerned the terms of the agreement have been set out in the order of the Assessing Officer and have been considered in a considerable amount of detail in the order passed by the CIT(A) which was eventually confirmed by the Tribunal. The agreement dated 24 May 1993 provided for a preliminary survey in respect of the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax Vs. Buckau Wolf New Indian Engineering Works Ltd. [1986] 157 ITR 751 the issue arose in the context of an agreement under which an assessee was to pay an amount of Rs.1,00,000/- to its German collaborators in annual instalments of Rs.20,000/- and the question which was referred was whether the entire amount of Rs. 1,00,000/- represented revenue expenditure deductible while computing the total income of the assessee for the Assessment Year 1967-68. The Division Bench noted that the question which was required to be considered was whether there was accrual of liability in the assessment year, though with a facility of a deferred payment. The Court held that it was an admitted position that the assessee kept its accounts on the basis of the mercantile accounting system, and if the terms of the agreement were construed it would have to be held that the assessee had incurred the entire liability for the payment of Rs.1,00,000/- in the assessment year under consideration though the actual payment was spread over five years. The judgment of the Division Bench also followed a decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. Vs. CIT, [1971] 82 ITR 363 (SC) i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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