Such expenditure was allowed as deduction in 14 equal instolments starting from the previous year is which payment was made.
(i) Any instalment of such expenditure incurred before 1-4-1998 shall not be left for claiming as deduction during the previous year commencing from the previous year 2011-12. Hence section 35A is not applicable w.e.f. Previous Year 2011-12.
(ii) Any expenditure incurred on know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights on or after 1-4-1998 shall not qualify to be written off in the above manner. From 1-4-1998 it shall be eligible for claim of depreciation at prescribed rates i.e. 25%.
Tax Treatment on Sale of Patent/Copy right covered u/s 35A
If the rights come to an end or are sold and sale proceeds are less than the cost of acquisition thereof not charged, so far, a deduction equal to such cost remaining is allowed 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.
If sale proceeds are more than the cost of acquisition remaining unallowed, the excess part will be business income of the previous year in which, the whole or any part of the rights is sold. In case of loss on account of sale of part of such rights, the loss will be spread over remaining number of years. The excess of amount realised over actual cost shall be capital gain to be computed as per provisions given u/s 48 i.e. indexing.
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.