Section 180A of the Income-tax Act, 1961: Consideration for Know-How

Section 180A provided a special method of spreading certain lump-sum receipts for the use of technical know-how over three previous years. Its express assessment-year restriction makes it a historical provision rather than a relief for current-year receipts.

What does section 180A provide?

Under section 180A, a resident individual who spent more than twelve months developing qualifying know-how could elect to allocate the gross lump-sum consideration for permitting its use equally across the year of receipt or accrual and the two immediately preceding previous years. The election applied for the purpose of charging income-tax in those years.

The Explanation to section 180A adopts the meaning of know-how in section 35AB: industrial information or a technique likely to assist manufacture or processing of goods, or work relating to a mine, oil well or other mineral deposits, including exploration, discovery, testing or obtaining access.

Conditions for claiming the historical treatment

1. The recipient had to be an individual resident in India.
2. Development of the know-how had to take more than twelve months.
3. The amount had to be lump-sum consideration received or receivable for allowing use of the know-how.
4. The receipt or accrual had to relate to assessment year 2000-01 or an earlier assessment year.
5. The individual had to elect the special allocation; it was not automatic.

How the three-year allocation worked

Once elected, one-third of the gross consideration was included in taxable income for each of the relevant three previous years, subject to the applicable assessment rules.

Illustration only: it explains the historical mechanism and does not establish eligibility for a present-day claim.

Rectification of earlier assessments under section 154

Clause (b) of section 180A directed that, where assessments for the two preceding previous years had already been made, they be rectified under section 154 to reflect the allocation. For this purpose, the four-year period referred to in section 154(7) was calculated from the end of the financial year in which the assessment for the year of receipt or accrual was made.

This was a specific historical timing rule. It should not be understood as reopening expired assessments generally or extending present-day limitation periods.

Legislative history and present relevance

Section 180A was inserted by the Finance Act, 1985 (Act 32 of 1985), section 31, with effect from 1 April 1986. The Finance Act, 1999 (Act 27 of 1999), section 68, substituted the wording restricting its application to assessment year 2000-01 or earlier, effective 1 April 2000.

The Income-tax Department's 2025 legislative navigator identifies section 180A as redundant in the new-law mapping because it concerned periods before 1 April 2000. The historical text remains relevant for interpreting legacy records and disputes, but it is not a current tax-planning relief.

Difference between sections 180A and 35AB

Section 180A concerned the taxation of qualifying lump-sum consideration in the hands of an individual developer who allowed another person to use know-how. Section 35AB concerned the deduction of qualifying expenditure incurred by a person acquiring know-how for business purposes, and supplied the definition used by section 180A. Their purposes and qualifying periods were different.

Official references and further reading

• Income-tax Department: Section 180A (historical statutory text)
• Income-tax Department: Section 35AB and definition of know-how
• India Code: Income-tax Act, 1961
• Income-tax Department: 2025 legislative navigator

Updated 27 October 2026. This article explains a historical provision and is for general legal information, not case-specific tax advice.