COMMISSIONER OF INCOME TAX Vs. NIRMA LTD

JUDGEMENT

(1.) This appeal is filed by the Revenue challenging judgement of the Income Tax Appellate Tribunal dtd. 31/7/2006. Upon hearing counsel for the parties, we feel that there is a need to reframe the question which was framed at the time of admission of the appeal. We accordingly re-frame the question of law for our consideration as under:

(2.) Short facts are as under:

(3.) The assessee carried the matter in appeal. Commissioner (A) dismissed the appeal and confirmed the view of the Assessing Officer upon which, the assessee preferred further appeal before the Tribunal. The Tribunal relying on the decision of Hyderabad Bench in case of VBC Industries Ltd. vs. DCIT reported in 48 ITD 292 held that the fact that the business had not started was of no consequence. In the opinion of the Tribunal the essential requirements for applicability of Sec. 35AB of the Act were that the assessee should have paid amount by way of lumpsum for acquiring technical knowhow, that such technical knowhow should be capable of being used for the purpose of business of the assessee. If these requirements are satisfied the assessee could claim the deductions spread over six years from the year of initial expenditure. In the opinion of the Tribunal, the fact, whether such knowhow was actually put to use or not, was of no consequence.