Income Tax Act, 1961
Section 3: Subs. by s. 18, for clause (i) (w.e.f. 11996).
3. Subs. by s. 18, for clause (i) (w.e.f. 11996).
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and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in
force;]
(ii) “appropriate fraction” means the fraction the numerator of which is one and the denominator
of which is the total number of the relevant previous years;
(iii) “payment has actually been made” means the actual payment of expenditure irrespective of
the previous year in which the liability for the expenditure was incurred according to the method of
accounting regularly employed by the assessee.
(2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital
sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure
remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the
previous year in which the licence is transferred.
(3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as
they consist of capital sums) exceed the amount of the expenditure incurred remaining unallowed, so
much of the excess as does not exceed the difference between the expenditure incurred to obtain the
licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as
profits and gains of the business in the previous year in which the licence has been transferred.
Explanation.—Where the licence is transferred 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.
(4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as
they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed,
no deduction for such expenditure shall be allowed under sub-section (1) in respect of the previous year in
which the licence is transferred or in respect of any subsequent previous year or years.
(5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the
deduction to be allowed under sub-section (1) for expenditure incurred remaining unallowed shall be
arrived at by—
(a) subtracting the proceeds of transfer (so far as they consist of capital sums) from the
expenditure 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 licence is transferred.
(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the
licence to the amalgamated company (being an Indian company),—
(i) the provisions of sub-sections (2), (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 amalgamating company if the latter had not transferred the licence.]
1[(7) Where, in a scheme of demerger, the demerged company sells or otherwise transfers the licence
to the resulting company (being an Indian company),—
(i) the provisions of sub-sections (2), (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 transferred the licence.]
(w.e.f. 11996).
194
and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in
force;]
“appropriate fraction” means the fraction the numerator of which is one and the denominator
of which is the total number of the relevant previous years;
“payment has actually been made” means the actual payment of expenditure irrespective of
the previous year in which the liability for the expenditure was incurred according to the method of
accounting regularly employed by the assessee.
Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital
sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure
remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the
previous year in which the licence is transferred.
Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as
they consist of capital sums) exceed the amount of the expenditure incurred remaining unallowed, so
much of the excess as does not exceed the difference between the expenditure incurred to obtain the
licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as
profits and gains of the business in the previous year in which the licence has been transferred.
Explanation.—Where the licence is transferred 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.
Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as
they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed,
no deduction for such expenditure shall be allowed under sub-section
in respect of the previous year in
which the licence is transferred or in respect of any subsequent previous year or years.
Where a part of the licence is transferred in a previous year and sub-section
does not apply, the
deduction to be allowed under sub-section
for expenditure incurred remaining unallowed shall be
arrived at by—
subtracting the proceeds of transfer (so far as they consist of capital sums) from the
expenditure remaining unallowed; and
dividing the remainder by the number of relevant previous years which have not expired at
the beginning of the previous year during which the licence is transferred.
Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the
licence to the amalgamated company (being an Indian company),—
the provisions of sub-sections
and
shall not apply in the case of the amalgamating
company; and
the provisions of this section shall, as far as may be, apply to the amalgamated company as
they would have applied to the amalgamating company if the latter had not transferred the licence.]
1[
Where, in a scheme of demerger, the demerged company sells or otherwise transfers the licence
to the resulting company (being an Indian company),—
the provisions of sub-sections
and
shall not apply in the case of the demerged
company; and
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 transferred the licence.]