Deduction for technical knowhow cannot be allowed to trading company as it could not be said to have received any technical know how

The assessee had paid a sum of Rs. 2 crores to M/s. Procter & Gamble India Ltd (PGI) towards technical know how fees in assessment year 1994-95. The assessee had amortized the expenditure over a period of six years and claimed deduction of Rs. 33,33,333/- being 1/6th of the payment during the year. AO noted that the assessee was only a trading company and not a manufacturing company and therefore it could not be said to have received any technical know how from PGI and accordingly disallowed the claim.

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