Insertion of new section 35A

Section 10 of the Finance Act, 1966 deals with insertion of new section 35A. Insertion of new section 35A 10. After section 35 of the Income-tax Act, the following section shall be inserted, namely: — Expenditure on acquisition of patent rights or copyrights '35A. The Act was enacted on 13 May 1966.

Insertion of new section 35A

10. After section 35 of the Income-tax Act, the following section shall be inserted, namely: —

Expenditure on acquisition of patent rights or copyrights

'35A. (1) In respect of any expenditure of a capital nature incurred after the 28th day of February, 1966, 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 un-allowed, 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 an respect of any subsequent previous year.

(3) Where the rights either come to an end without being-subsequently revived or are sold in their entirely and fee proceeds of the sale (so far as they consist of capital sums) are less than the cost of acquisition thereof remaining un-allowed, a deduction equal to such cost remaining un-allowed or as the case may be, such cost remaining un-allowed 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 un-allowed, 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 un-allowed 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 un-allowed; 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.'.

[Finance Act, 1966]

© Copyright. Taxmann Publications Pvt. Ltd.

Section 10, The Finance Act, 1966 (Act 13 of 1966).