Case Law Details
M/s. Theis Precision Steel India Private Limited Vs ITO (ITAT Mumbai)
From perusal of Section 37 of the Act, we find that all expenditure incurred in the course of business of the assessee is allowable except personal expenditure and capital expenditure. Admittedly, professional fee has been paid for valuation of know-how of business and, therefore, the same is not in the nature of personal expenditure.
Now, we need to determine whether the expenditure incurred for valuation of know-how can be treated as in capital In this regard, we find that to term the expenditure as capital expenditure we need to find out whether the incurrence of expenditure has resulted into any generation of capital asset or any right or benefit of enduring nature has been created by incurrence of the expenditure.
From the nature of expenditure incurred, we find that the expenditure is not incurred for the acquisition of know-how; it is incurred only for the purpose of valuation of the know-how. Admittedly, the expenditure in isolation has not created any asset nor has it added any value in the know-how of the assessee, benefit of which can be said to have accrued to the assessee over a longer period. Further, valuation of know-how was in the course of business of the assessee as know-how pertained to the business of the assessee.
Further, assessee has placed before us the detailed valuation report obtained by him for valuation of know-how and the copies of invoices for professional fee paid for carrying out the valuation exercise. Thus, we find that the said expenditure is not in the nature of capital expenditure but is in the revenue field; and, thus is allowable under Section 37(1) of the Act. The order of CIT(A) is accordingly set aside and the Assessing Officer is directed to delete the addition made on account of professional fee paid for valuation of know-how.
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