(1) Section 768 of the Principal Act is amended -

(a) by substituting the following for subsection (3):

 "(3) Where -

(a) a person acquires a trade or part of a trade and, together with the trade or the part of the trade, know-how used in the trade or part of the trade, or

(b)

(i) a person acquires a trade or part of a trade, and

(ii) a person connected (within the meaning of section 10) with the person acquires know-how used in the trade or the part of the trade,

then no amount shall be allowed to be deducted under this section in respect of expenditure incurred on the acquisition of the know-how.

(3A) The amount which shall be allowed to be deducted under this section in respect of expenditure incurred by a person on know-how shall be limited to the amount which has been incurred wholly and exclusively on the acquisition of know-how for bona fide commercial reasons and was not incurred as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.",

and

(b) by inserting the following after subsection (4):

 "(5)