DT: Amendment in scientific research

Click on the following links to read the amendments provided in the previous posts

1. Amendments in Charitable Purpose and Income definition

2. Amendments in Period of Holding and Residential Status

3. Amendment in Additional Depreciation

4. Know everything about section 32AD 
5. Amendment in section 36 of P/G/B/P 

Today, we are posting the amendment related to scientific research. 

 

Section 35(2AB)

According to section 35(2AB), weighted deduction of 200 per cent is allowed to a company engaged in the business of bio-technology or manufacture of goods (except items specified in Schedule XI). This weighted deduction is available in respect of in-house scientific research expenditure (not being expenditure in the nature of cost of any land or building) incurred on approved in-house research and development facility. For availing this weighted deduction, the company is required to enter into an agreement with the Secretary, Department of Scientific and Industrial Research (DSIR) and is also required to obtain his approval. The Secretary, DSIR is required to send the required to obtain his approval. The Secretary, DSIR is required to send the report regarding approval to DGIT (Exemption) in Form No. 3CL who generally does not have jurisdiction over the assessee-company. Further, the company is required to maintain separate books of account for approved R&D facility and is also required to get the accounts audited. However, the copy of audit report is required to get the accounts audited. However, the copy of audit report is required to be submitted to the DSIR only.

The Comptroller and Auditor General of India in its report on performance audit of pharmaceuticals sector recommended rationalization of the provision relating to monitoring of this weighted deduction. In order to have a better and meaningful monitoring mechanism for weighted deduction allowed under section 35(2AB) the following amendments have been made with effect from the assessment year 2016-17-

1.       1. Deduction under section 35(2AB) shall be allowed only if the company enters into an agreement with the prescribed authority for co-operation in such research and development facility and fulfils prescribed conditions with regard to maintenance and audit of accounts and also furnishes prescribed reports.

2.      2.  Reference of the Principal Chief Commissioner or Chief Commissioner has been inserted in section 35(2AA) and section 35(2AB) so that the report referred to therein may be sent to the Principal Chief Commissioner or Chief Commissioner having jurisdiction over the company claiming the weighted deduction under the said section.