TaxTMI 
TaxTMI 
2000 (2) TMI 7
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....imco"), an American company, and K. C. P. Ltd. (for short "KCP"), an Indian company, promoted the appellant company. The authorised capital of the appellant was Rs. 1,00,00,000 consisting of 10,00,000 equity shares of Rs. 10 each. Each of them agreed to subscribe Rs. 4,70,000 out of which each will have to pay initially a sum of Rs. 2,80,000 towards its contribution. Towards its share, Eimco contributed technical know-how consisting of the right and licence to manufacture existing Eimco sedimentation and filtration equipment, along with the supply of and/or the agreement to supply general technical data including manufacturing drawings in the form as used and possessed by Eimco, relating to the sales, application, selection, material requir....
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....ture under section 35A was erroneous and prejudicial to the interests of the Revenue and thus set aside the same. Thereafter, the Appellate Assistant Commissioner dismissed the appeal and directed that 1/14th amount be added back as income of the assessee. Against both the orders, the appellant filed appeals before the Income-tax Appellate Tribunal. The Tribunal, on December 12, 1975, allowed the appeals of the appellant taking the view that the said amount was revenue expenditure of the appellant. At the instance of the Revenue, the following two questions were referred to the High Court under section 256(1) of the Act: "(1) Whether, on the facts and in the circumstances of the case, the Commissioner could interfere, acting under sectio....
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.... treated as expenditure incurred by it for purchase of know-how. To appreciate the contention of Mr. Reddy, it may be necessary to quote section 37(1) of the Income-tax Act here: "37. General.-(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'." A plain reading of the above provision makes it clear that it is a residuary provision and allows an expenditure, not covered under sections 30 to 36 in computing t....
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....s. 1,00,00,000 consisting of 10,00,000 equity shares of Rs. 10 each. 5. Each partner will subscribe to Rs. 4,70,000; of this amount each will initially pay in Rs. 2,80,000 or equivalent after approval by the Government of India and before commencement of operation; and the balance of the amount subscribed will be contributed by each partner, in equal amounts, as and if required for operation of the business. 6. The amount initially paid in by Eimco will primarily consist of Eimco's know-how, valued at Rs. 2,35,000 and cash. Know-how consists of the right and licence to manufacture existing Eimco sedimentation and filtration equipment, along with the supply of and/or the agreement to supply general technical data including manufacturin....