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TMI Blog2012 (6) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... se only after acquiring the know-how and, therefore, this imparting is distinct from acquisition of know-how though both of them are for the use of the assessees' business. As rightly held by the Tribunal, it is in the nature of a revenue expenditure incurred by the assessees in its business after acquiring the know-how for a lump sum consideration. Therefore, the entire amount has to be deducted under section 37(1) of the Act and it does not fall under section 35AB. - Decided in favor of assessee. - 1536 of 2005 - - - Dated:- 13-7-2010 - KUMAR N., NAGARATHNA MRS. B. V., JJ. JUDGMENT N. Kumar J.- 1. This appeal is by the Revenue, challenging the order passed by the Tribunal which has held that the expenses incurred for impar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer held it is not correct to distinguish this payment to technicians from technical know how. Hence, the deduction claimed was disallowed and deduction was allowed as per the provisions of section 35AB. Aggrieved by the said order, the assessee preferred an appeal. The appellate authority affirmed the said order of the Assessing Officer and dismissed the appeal. Aggrieved by the same, the assessee pre- ferred an appeal to the Tribunal. The Tribunal on proper interpretation of the two agreements entered into between the assessee with the foreign company held the agreement dated March 10, 1994, is for imparting necessary know-how and expertise to the personnel in the use and exploit- ing of the technical data whereas the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for providing techni- cians to train the assessee's personnel in manufacturing, testing, inspection and quality control of its products and to impart know-how and technical data and suggest improvements thereto, as per the mutual agreement sub-clause 7.4 did not fall under section 35AB of the Act, but was entitled to total relief under section 37(1) of the Act ?" 4. Learned counsel for the Revenue contended though the parties have entered into two agreements, the second agreement is for imparting the technical know-how to the employees of the assessee. It is for imparting the technical know how, consideration is paid though not in lump sum and not in a specified manner and, therefore, it cannot be said that the aforesaid payment does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, to the licensee's plant in India for the purpose of assisting the licensee in connection with the manufacture, testing, inspection and quality control of the product and to impart necessary know-how and expertise to the licensee's personnel in the use and exploitation of the technical data and improvements thereto. Licensee shall directly bear the air fare and other travelling and living expenses of each such technician. Licensee shall pay Molex fees as may be mutually agreed and as may be permissible, per man for each day. The said payment shall be in addition to the air fare and other travelling and living expenses of the technicians to be borne directly by the licensee. All fees, costs and expenses on account of such technicians sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and exploitation of the technical data and improvements thereto. There- fore, for attracting section 35AB, three conditions must exist. They are : (1) a lump sum consideration ; (2) It is for acquiring the know-how ; and (3) the said acquisition is to be used for his business. 9. In the case of imparting this technical know-how, firstly, there is no lump sum payment. Imparting know-how to the assessee's personnel would arise only after acquiring the know-how and, therefore, this imparting is distinct from acquisition of know-how though both of them are for the use of the assessees' business. As rightly held by the Tribunal, it is in the nature of a revenue expenditure incurred by the assessees in its business after acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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