Expenditure on Scientific Research And Its Treatment Under Income Tax Act, 1961 By FCS Deepak P. Singh


We are going through a very turbulent phase in which we are facing unpresented threat of COVID-19 pandemic, declining pace of economy, lack of foreign reserves and new threat of India -China war position at our borders.
B. CONTRIBUTION BY AN ASSESSEE TO OTHER OUTSIDE ITS BUSINESS;
Relevant Section of Income Tax Act, 1961 |
Organisations to whom contribution made |
Rate of Deduction up to AYs 2011-12 to 2017-18 |
Rate of Deduction up to AY 2018-19 to 2020-21 |
Rate of Deduction AY 2021-22 onwards |
Section -35(1)(ii) |
An Approved Scientific Research Association which has, as its object, undertaking of Scientific Research related or unrelated to the business of the assessee. |
175% |
150% |
100% |
Section -35(1)(ii) |
An Approved University, College or other institutions for the use of Scientific Research related or unrelated to the business of the Assessee. |
175% |
150% |
100% |
Section -35(1)(iii) |
An Approved University, College or other institutions for the use of research in Social Sciences or Statistical Research related to unrelated to the business of the assessee. |
125% |
100% |
100% |
- The taxpayer may be any person such as Individual, HUF, Firm, LLP, Company, AOP or BOI, etc.;
- The taxpayer has paid any amount to an Indian Company (Approved Scientific Research Company) to be used in Scientific Research;
- Scientific Research may or may not related to the business of the taxpayer;
- The Approved Scientific Research Company must have Scientific Research as its main object;
- Approved Scientific Research Company must have approval from prescribed authority;
- The Approved Scientific Research Company fulfils such other rules and regulations as may be prescribed.
(v) The depreciation on the assets used in Scientific Research shall not be allowed in any year.
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National Laboratory; or
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University; or
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IITs; or
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Specified Person as approved by Specified Authority.
E. EXPENSES ON IN-HOUSE RESEARCH AND DEVELOPMENT [SECTION 35(2AB)]:
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Taxpayer is a company;
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The company should engage in the business of bio-technology or any business of manufacture or production of any article or thing except those specified in the XI Schedule;
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The company has incurred expenditure on scientific research (whether it to revenue or capital) during previous year. The expenditure on scientific research in relation to dugs and pharmaceutical shall include expenditure incurred on clinical trial, regulatory approvals and filing application for patent;
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The expenditure should not be held on purchase of land;
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The Company has entered into an agreement with the prescribed Authority for co-operation in such research and development facility for audit of accounts maintained for that facility or fulfil such conditions related to the way of maintenance of accounts and records, audit and submission of report to the Authority;
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The company should apply in Form 3CK, with Research and Development Authority approved the same in Form 3CM. The Prescribed Authority should approve the facility within a period of 120 days from the date of application and if approval not received within prescribed time, then deduction to the company shall not be disallowed;
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The company shall maintain a separate book of account for each Approved Research Facility and same shall be audited every year as may be prescribed by Authority.
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An Audited Report in Form 3CL A shall be filed electronically by the Company with Authority within due date of filing Income Tax Returns as may be prescribed.

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About Author
FCS Deepak P. Singh
Qualification: Company Secretaryship
Company: SBI GENERAL INSURANCE CO. LTD.
Location: MUMBAI
Member Since: 25 Jan 2020 | Total Articles Contributed: 315
About Author :
Hi I am CS Deepak P Singh, having more than 19 years experience in fields of Legal, Accounting, Project Finance, Secretarial Works, Direct Taxes, Indirect Taxes,etc.
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