What is Expenditure on know-how? Section
Income Tax Act 1961
Expenditure on know-how is defined under section
35AB of Income Tax Act 1961.
Provisions under this section is:
of Income Tax Act "Expenditure on know-how"
35AB. (1) Subject to the provisions of sub-section (2),
where the assessee has paid in any previous year relevant to
the assessment year commencing on or before the 1st day of
April, 1998 any lump sum consideration for acquiring any
know-how for use for the purposes 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
installments for each of the five immediately succeeding
(2) Where the know-how referred to in sub-section (1) is
developed in a laboratory, university or institution
referred to in sub-section (2B) of section 32A, one-third of
the said lump sum consideration paid in the previous year by
the assessee shall be deducted in computing the profits and
gains of the business for that year, and the balance amount
shall be deducted in equal installments for each of the two
immediately succeeding previous years.
(3) Where there is a transfer of an undertaking
under a scheme of amalgamation or demerger and the
amalgamating or the demerged company is entitled to a
deduction under this section, then, the amalgamated company
or the resulting company, as the case may be, shall be
entitled to claim deduction under this section in respect of
such undertaking to the same extent and in respect of the
residual period as it would have been allowable to the
amalgamating company or the demerged company, as the case
may be, had such amalgamation or demerger not taken place.
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).