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Here is a case of a joint venture company. The foreign partner has brought technical knowhow as capital contribution. The company preferred to claim a deduction as revenue expenditure of sum represented by contribution for the supply of technical knowhow. The assessing office treated such sum as capital expenditure u/s 35A and allowed deduction at 1/14th of the said sum.  The Commissioner of Income-tax in the exercise of his revisional jurisdiction revised the order of the assessing officer and directed that 1/14th amount be added back as income of the assessee. The High court affirmed the order of the Commissioner. The Supreme Court in confirming the order of the High Court held that what in fact was done by the appellant in alloting shares to the foreign partner was to reimburse the contribution by way of technical knowhow, which can never be treated as expenditure , much less an expenditure laid out wholly and exclusively for purposes of the business of the assessee. In such case even therefore it would be difficult to make a claim for depreciation either in the current tax regime.

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