Section 35AB of ITA, 1961 : Section 35Ab: Expenditure On Know-How

Explanation using Example

Imagine a scenario where ABC Pharmaceuticals, a company in India, has paid Rs. 6 million in the financial year 1997-98 to XYZ Innovations, a foreign company, for acquiring exclusive rights to a pharmaceutical know-how. This know-how is a unique formula for a drug that helps in combating a specific disease and is expected to give ABC Pharmaceuticals a competitive edge in the market.

According to Section 35AB of the Income-tax Act, 1961, ABC Pharmaceuticals can claim a deduction for this expenditure in its income tax return. In the financial year 1997-98, they can deduct one-sixth of the amount paid, whi...

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