Expenditure on Scientific Research - (New) Section 45 / (Old) Section 35

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....l businesses of that class; (1) Deduction for in-house scientific research [ Section 45(1) ] • (a) Condition for Deduction • A deduction shall be allowed for any expenditure, being in the nature of-- • (i) capital expenditure, (Except acquisition of land which is acquired as such or as part of any property); or • (ii) revenue expenditure, • incurred on scientific research related to the business of the assessee subject to provisions of this section. • (b) Pre-commencement revenue expenditure • The aggregate of expenditure (not being in the nature of capital expenditure), related to business, incurred on  • (i) salary to an employee engaged in such scientific research; or • (ii) purchase of materials used in such scientific research, • where such expenditure is incurred within three years immediately preceding the commencement of business, to the extent certified by the prescribed authority as incurred on such research and such expenditure shall be deemed to have been incurred in the tax year in which the business is commenced. â....

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....€¢ Time limit: within 4 months from end of application month • (ii) Rejection • Company must be given reasonable opportunity of being heard • (iii) Communication • Copy of order sent to Jurisdictional Chief Commissioner of Income-tax • Ensures tax department alignment. (e) Conditions for approval of in-house R&D expenditure (i) Ineligible activities • market research, • sales promotion, • quality control / testing, • commercial production, • style changes, • routine data collection or activities of similar nature; (ii) Reporting by authority • Part A of Form No. 12 - approval of in-house research and development facility • Part B of Form No. 12 - quantifying the expenditure for eligible expenditure under section 45(2) • Such Report in Form 12 shall be furnished electronically • by the Department of Scientific and Industrial Research (DISIR) • to the Chief Commissioner of Income-tax having jurisdiction over such company within 120 days,- ....

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....;Refer this chapter ) • (i) a national laboratory; or • (ii) a University; or • (iii) an Indian Institute of Technology; or • (iv) a specified person. Conditions for deduction under section 45(3)  [ Section 45(4) ] (a) Documentation -  the expenditure shall be allowed subject to such conditions and on furnishing of documents in such form and manner, as may be prescribed; and (b) Approved entities only -  in respect of clause (a) of the said sub-section, only such association, University, college or other institution shall be eligible for deduction, which for the time being is approved in the manner and subject to such conditions, as may be prescribed, and is specified by the Central Government, by notification. Furnishing of statement of particulars in respect of donation and certificate to donor under Section 45(4)(a) [ Refer this chapter ] Procedure, Form & Approval Mechanism for Scientific Research Associations under Section 45(4) [ Refer this chapter ] Conditions for claiming a deduction for expenditure on scientific research by way of a co....

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....ic Research" means any activities for the extension of knowledge in the fields of natural or applied sciences including agriculture, animal husbandry or fisheries. Besides, Scientific Research, donation for research in social sciences like human behaviour and marketing research work are also covered under this section. In respect of expenditure on research, the following deductions shall be allowed: Section 35(1)(i) Revenue Expenditure incurred before commencement of business Expenditure incurred on salary (excluding perquisite) and on purchase of material used in research within the 3 years immediately preceding the year of commencement of business, shall be allowed as a deduction in the year in which business is commenced. However, salary paid before the commencement of business shall not be allowed. Revenue Expenditure incurred after commencement of business 100% of revenue expenditure laid out or expended on scientific research related to the business carried on by the assessee. Section 35(1)(ii) An amount equal to 100% of any sum paid to research association which has as its object the undertaking of scientific research or to a university....

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....f their FMV. Cost of the land is not allowable as deduction and cost of building shall be allowed as deduction u/s 35(1)(iv). Section 35(2AA) Higher deduction on payment made to approved specified persons for Scientific Research. Deduction - 100% of sum paid to National Laboratory, University, IIT or specified person approved by prescribed authority with a specific direction that it shall be used for scientific research under an approved research programme. [Research is related to business of assessee] Such institution shall issue a receipt of payment for carrying out such approved programme  in Form 3CJ. If deduction is allowed under this section, then no deduction for such sum shall be allowed under any other provisions of this Act Note: Deduction shall not be denied if the approval granted to National Laboratory, or research program is withdrawn after payment has been made by the assessee. Section 35(2AB) Higher deduction to companies which are engaged in business of manufacture or production of specified articles for conducting In House Scientific Research. Deduction - 100% of the expenditure (excluding cost of land or building) on sc....