No Benefit after 31/3/2007 . Hurry!

January 6, 2007 by taxworry · Leave a Comment

Whether a company can claim deduction under Section 35 for Expenditure on scientific research, if the company in consultation with its team of engineers develops an improved version of existing plant and machinery which saves the time of manufacturing the existing product and also rejection level by the customer.Please also elaborate the other issues related to the Deduction under section 35 of the Indian Income Tax Act, 1961. With regards, Swamy

First thing one should remember to read Section 5 of Section 35 which is important for NOW
“(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2007.”

Otherwise , in my opinion ,Yes you can claim for Any Expenditure on scientific research related to your business if you do the Scientific Research yourself as per sub-section [1] of Section 35. which says “ (1) In respect of expenditure on scientific research, the following deductions shall be allowed

(i) any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business……”

In case , there is controversy whether there is scientific research or not, Sub Section 3 provides mechanism of settling the issue . The relevant provision is given below

“(3) If any question arises under this section as to whether, and if so, to what extent, any activity constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer the question to

(a) the Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;
(b) the prescribed authority, when such question relates to any activity other than the activity specified in clause (a), whose decision shall be final.”

Tags: Exemption

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