35A. Expenditure on acquisition of patent rights or copyrights.-
(1) In respect of any expenditure of a capital nature
incurred after the 28th day of February, 1966 but before the
1st day of April, 1998, on the acquisition of patent rights
or copyrights (hereafter, in this section, referred to as
rights) used for the purposes of the business, there shall,
subject to and in accordance with the provisions of this section,
be allowed for each of the relevant previous years, a deduction
equal to the appropriate fraction of the amount of such expenditure.
Explanation.—For the purposes of this section,—
(i) “relevant previous years” means the fourteen
previous years beginning with the previous year in which such
expenditure is incurred or, where such expenditure is incurred
before the commencement of the business, the fourteen previous
years beginning with the previous year in which the business
commenced :
Provided that where the rights commenced, that is to say,
became effective, in any year prior to the previous year in
which expenditure on the acquisition thereof was incurred
by the assessee, this clause shall have effect with the substitution
for the reference to fourteen years of a reference to fourteen
years less the number of complete years which, when the rights
are acquired by the assessee, have elapsed since the commencement
thereof, and if fourteen years have elapsed as aforesaid,
of a reference to one year;
(ii) “appropriate fraction” means the fraction
the numerator of which is one and the denominator of which
is the number of the relevant previous years.
(2) Where the rights come to an end without being subsequently
revived or where the whole or any part of the rights is sold
and the proceeds of the sale (so far as they consist of capital
sums) are not less than the cost of acquisition thereof remaining
unallowed, no deduction under sub-section (1) shall be allowed
in respect of the previous year in which the rights come to
an end or, as the case may be, the whole or any part of the
rights is sold or in respect of any subsequent previous year.
(3) Where the rights either come to an end without being
subsequently revived or are sold in their entirety and the
proceeds of the sale (so far as they consist of capital sums)
are less than the cost of acquisition thereof remaining unallowed,
a deduction equal to such cost remaining unallowed or, as
the case may be, such cost remaining unallowed as reduced
by the proceeds of the sale, shall be allowed in respect of
the previous year in which the rights come to an end, or,
as the case may be, are sold.
(4) Where the whole or any part of the rights is sold and
the proceeds of the sale (so far as they consist of capital
sums) exceed the amount of the cost of acquisition thereof
remaining unallowed, so much of the excess as does not exceed
the difference between the cost of acquisition of the rights
and the amount of such cost remaining unallowed shall be chargeable
to income-tax as income of the business of the previous year
in which the whole or any part of the rights is sold.
Explanation.—Where the whole or any part of the rights
is sold in a previous year in which the business is no longer
in existence, the provisions of this sub-section shall apply
as if the business is in existence in that previous year.
(5) Where a part of the rights is sold and sub-section (4)
does not apply, the amount of the deduction to be allowed
under sub-section (1) shall be arrived at by—
(a) subtracting the proceeds of the sale (so far as they
consist of capital sums) from the amount of the cost of acquisition
of the rights remaining unallowed; and
(b) dividing the remainder by the number of relevant previous
years which have not expired at the beginning of the previous
year during which the rights are sold.
(6) Where, in a scheme of amalgamation, the amalgamating
company sells or otherwise transfers the rights to the amalgamated
company (being an Indian company),—
(i) the provisions of sub-sections (3) and (4) shall not
apply in the case of the amalgamating company; and
(ii) the provisions of this section shall, as far as may
be, apply to the amalgamated company as they would have applied
to the amalga-mating company if the latter had not so sold
or otherwise transferred the rights.
(7) Where in a scheme of demerger, the demerged company sells
or otherwise transfers the rights to the resulting company
(being an Indian company),—
(i) the provisions of sub-sections (3) and (4) shall not
apply in the case of the demerged company; and
(ii) the provisions of this section shall, as far as may
be, apply to the resulting company as they would have applied
to the demerged company, if the latter had not sold or otherwise
transferred the rights.
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