Meaning of “For”

The meaning of for under section 35AB of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here is an excerpt of the court’s order in which the Hon’ble Supreme Court tried to explain the meaning of for.

Meaning of for defined by court

The phrase ‘for’ used in section 35AB of the Income Tax Act came up before Hon’ble Supreme Court in Drilcos (India)(P.) Ltd. Vs. CIT [2012] 25 TAXMANN.COM 228/210 TAXMAN 267/348 ITR 382/252 CTR 349 (SC) and it explained.

Meaning : The word ‘for’ in section 35AB, which is a preposition in english grammar, has to be emphasized while interpreting section 35AB.

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 instalments for each of the five immediately succeeding previous years.

(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 instalments 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).

Section 35AB of Income Tax Act