Income Tax Act, 1961
Section 3: Ins. by Act 20 of 1967, s. 13 (w.e.f. 11967).
3. Ins. by Act 20 of 1967, s. 13 (w.e.f. 11967).
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1[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 2[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.]
In respect of any
expenditure of a capital nature incurred after the 28th day of February, 1966 2[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,—
“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;
“appropriate fraction” means the fraction the numerator of which is one and the denominator
of which is the number of the relevant previous years.
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
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.
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.]
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.
Where a part of the rights is sold and sub-section
does not apply, the amount of the deduction
to be allowed under sub-section
shall be arrived at by—
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
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.]