Expenditure on scientific research 2.
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. Explanation.- Where any such expenditure has been laid out or expended before the commencement of the business not being expenditure laid out or expended before the 1st day of April, 1973 on payment of any salary as defined in Explanation 2 below sub- section 5 of section 40A to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced ii any sum paid to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research Provided that such association, university, college or institution is for the time being approved for the purposes of this 1. Reintroduced with modifications by the Direct Tax Laws Amendment Act, 1989, w. e. f. 1- 4- 1989. Earlier it was omitted by the Direct Tax Laws Amendment Act, 1987, with effect from the same date. 3. Inserted by the Direct Taxes Amendment Act, 1974, w. e. f. 1- 4- 1974. clause by the prescribed authority by notification in the Official Gazette iii any sum paid to a university, college or other institution to be used for research in social science or statistical research Provided that such university, college or institution is for the time being approved for the purposes of this clause by the prescribed authority by notification in the Official Gazette iv in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub- section 2 Provided that the scientific research association, university, college or other institution referred to in clause ii or clause iii shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of approval, or continuance thereof, under clause ii or, as the case may be, clause iii Provided further that the prescribed authority may, before granting approval under clause ii or clause iii , call for such documents including audited annual accounts or information from the scientific research association, university, college or other institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the scientific research association, university, college or other institution and that authority may also make such inquiries as it may deem necessary in this behalf Provided also that any notification issued by the prescribed authority under clause ii or clause iii shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years including an assessment year or years commencing before the date on which such notification is issued as may be specified in the notification.
any expenditure not being in the nature of capital expenditure laid out or expended on scientific research related to the business. Explanation.- Where any such expenditure has been laid out or expended before the commencement of the business not being expenditure laid out or expended before the 1st day of April, 1973 on payment of any salary as defined in Explanation 2 below sub- section 5 of section 40A to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced
any sum paid to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research Provided that such association, university, college or institution is for the time being approved for the purposes of this 1. Reintroduced with modifications by the Direct Tax Laws Amendment Act, 1989, w. e. f. 1- 4- 1989. Earlier it was omitted by the Direct Tax Laws Amendment Act, 1987, with effect from the same date. 3. Inserted by the Direct Taxes Amendment Act, 1974, w. e. f. 1- 4- 1974. clause by the prescribed authority by notification in the Official Gazette
Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1967.
any sum paid to a university, college or other institution to be used for research in social science or statistical research Provided that such university, college or institution is for the time being approved for the purposes of this clause by the prescribed authority by notification in the Official Gazette
in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub- section 2 Provided that the scientific research association, university, college or other institution referred to in clause ii or clause iii shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of approval, or continuance thereof, under clause ii or, as the case may be, clause iii Provided further that the prescribed authority may, before granting approval under clause ii or clause iii , call for such documents including audited annual accounts or information from the scientific research association, university, college or other institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the scientific research association, university, college or other institution and that authority may also make such inquiries as it may deem necessary in this behalf Provided also that any notification issued by the prescribed authority under clause ii or clause iii shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years including an assessment year or years commencing before the date on which such notification is issued as may be specified in the notification.
For the purposes of clause iv of sub- section 1 ,- 1. See rule 6 and Form No. 3CF. 2. Inserted by the Direct Tax Laws Amendment Act, 1989, w. e. f. 1- 4- 1989. 4. Substituted by the Finance No. 2 Act, 1991, w. e. f. 1- 4- 1992. Prior to substitution, clause iii read as under iii any sum paid to a university, college or other institution to be used for research in social science or statistical research related to the class of business carried on, being a university, college or institution which is for the time being approved for the purposes of this clause by the prescribed authority by notification in the Official Gazette The italicised words were inserted by the Direct Tax Laws Amendment Act, 1989, w. e. f. 1- 4- 1989. 7. Inserted by the Direct Tax Laws Amendment Act, 1989, w. e. f. 1- 4- 1989. i in a case where such capital expenditure is incurred before the 1st day of April, 1967 , one- fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding previous years ia in a case where such capital expenditure is incurred after the 31st day of March, 1967 , the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984 . Explanation 1.- Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced. Explanation 2.- For the purposes of this clause,- a land includes any interest in land and b the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 5 16 of 1908 , or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 6 4 of 1882 , the date on which he has so taken or retained possession of such land or part ii notwithstanding anything contained in clause i , where an asset representing expenditure of a capital nature incurred before the 1st day of April, 1967 , ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause i falls short of the said expenditure, then- a there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and b no deduction shall be allowed under that clause for that previous year or for any subsequent previous year iii if the asset mentioned in clause ii is sold, without having been 1. Substituted for clause i by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1968. 2. Inserted by the Finance Act, 1984, w. e. f. 1- 4- 1984. 3. ibid. 4. Ibid. 6. Ibid. 7. Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1968. used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place iv where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clause ii of sub- section 1 of section 32 for the same or any other previous year in respect of that asset v where the asset mentioned in clause ii is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under clause ii of sub- section 1 of section 32.
in a case where such capital expenditure is incurred before the 1st day of April, 1967 , one- fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding previous years ia in a case where such capital expenditure is incurred after the 31st day of March, 1967 , the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984 . Explanation 1.- Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced. Explanation 2.- For the purposes of this clause,- a land includes any interest in land and b the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 5 16 of 1908 , or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 6 4 of 1882 , the date on which he has so taken or retained possession of such land or part
ia in a case where such capital expenditure is incurred after the 31st day of March, 1967 , the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984 . Explanation 1.- Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced. Explanation 2.- For the purposes of this clause,-
a land includes any interest in land and
b the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 5 16 of 1908 , or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 6 4 of 1882 , the date on which he has so taken or retained possession of such land or part
notwithstanding anything contained in clause i , where an asset representing expenditure of a capital nature incurred before the 1st day of April, 1967 , ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause i falls short of the said expenditure, then- a there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and b no deduction shall be allowed under that clause for that previous year or for any subsequent previous year
a there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and
b no deduction shall be allowed under that clause for that previous year or for any subsequent previous year
if the asset mentioned in clause ii is sold, without having been 1. Substituted for clause i by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1968. 2. Inserted by the Finance Act, 1984, w. e. f. 1- 4- 1984. 3. ibid. 4. Ibid. 6. Ibid. 7. Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1968. used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place
where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clause ii of sub- section 1 of section 32 for the same or any other previous year in respect of that asset
where the asset mentioned in clause ii is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under clause ii of sub- section 1 of section 32.
2A Where, , before the 1st day of March, 1984 , the assessee pays any sum being any sum paid with a specific direction that the sum shall not be used for the acquisition of any land or building or construction of any building to a scientific research association or university or college or other institution referred to in clause ii of sub- section 1 or to a public sector company to be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, then,- a there shall be allowed a deduction of a sum equal to one and onethird times the sum so paid and b no deduction in respect of such sum shall be allowed under clause ii of sub- section 1 for the same or any other assessment year. Explanation.- For the purposes of this sub- section, public sector company shall have the same meaning as in clause b of the Explanation below sub- section 2B of section 32A.
a there shall be allowed a deduction of a sum equal to one and onethird times the sum so paid and
b no deduction in respect of such sum shall be allowed under clause ii of sub- section 1 for the same or any other assessment year. Explanation.- For the purposes of this sub- section, public sector company shall have the same meaning as in clause b of the Explanation below sub- section 2B of section 32A.
2AA Where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology with a specific 1. Substituted for clauses i , ii , iia , iii and vi of sub- section 1 or under sub- section 1A by the Taxation Laws Amendment and Miscellaneous Provisions Act, 1986, w. e. f. 1- 4- 1988. 2. Inserted by the Finance No. 2 Act, 1980, w. r. e. f. 1- 4- 1962. 3. Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1968. 4. Substituted for clauses i , ii and iii of sub- section 1 by the Taxation Laws Amendment and Miscellaneous Provisions Act, 1986, w. e. f. 1- 4- 1988. 5. Inserted by the Direct Taxes Amendment Act, 1974, w. e. f. 1- 4- 1974. 6. Inserted by Finance Act, 1984, w. e. f. 1- 4- 1984. 7. Inserted by Finance No. 2 Act, 1983, w. e. f. 1- 4- 1984. 8. Inserted by the Finance No. 2 Act, 1980, w. e. f. 1- 9- 1980. 10. Inserted by the Finance No. 2 Act, 1980, w. e. f. 1- 9- 1980. 11. Inserted by the Finance Act, 1993, w. e. f. 1- 4- 1994. 12. Inserted by the Finance Act, 1994, w. e. f. 1- 4- 1995. direction that the said sum shall be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority, I then- a there shall be allowed a deduction of a sum equal to one and onefourth times the sum so paid and b no deduction in respect of such sum shall be allowed under any other provision of this Act Provided that every National Laboratory or University or Indian Institute of Technology desirous of obtaining approval under this subsection shall make an application in the prescribed form and manner to the prescribed authority Provided further that the prescribed authority may, before granting approval, call for such documents or information from the National Laboratory or the University or the Indian Institute of Technology as it thinks necessary in order to satisfy itself about the genuineness of the activities relating to scientific research of such Laboratory or University or Institute, as the case may be. Explanation.- For the purposes of this section,- a National Laboratory means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio- Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed b University shall have the same meaning as in Explanation to clause ix of section 47 c Indian Institute of Technology shall have the same meaning as that of Institute in clause g of section 3 of the Institutes of Technology Act, 196 1 6 59 of 1961 .
a there shall be allowed a deduction of a sum equal to one and onefourth times the sum so paid and
b no deduction in respect of such sum shall be allowed under any other provision of this Act Provided that every National Laboratory or University or Indian Institute of Technology desirous of obtaining approval under this subsection shall make an application in the prescribed form and manner to the prescribed authority Provided further that the prescribed authority may, before granting approval, call for such documents or information from the National Laboratory or the University or the Indian Institute of Technology as it thinks necessary in order to satisfy itself about the genuineness of the activities relating to scientific research of such Laboratory or University or Institute, as the case may be. Explanation.- For the purposes of this section,-
National Laboratory means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio- Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed
University shall have the same meaning as in Explanation to clause ix of section 47
Indian Institute of Technology shall have the same meaning as that of Institute in clause g of section 3 of the Institutes of Technology Act, 196 1 6 59 of 1961 .
2B a Where , before the 1st day of March, 1984 , an assessee has incurred any expenditure not being in the nature of capital expenditure incurred on the acquisition of any land or building or construction of any building on scientific research undertaken under a programme approved in this behalf by the prescribed authority having 2. Inserted by the Finance Act, 1994, w. e. f. 1- 4- 1995. 3. Ibid. 4. Ibid. 5. Substituted by the Finance Act, 1994, w. e. f. 1- 4- 1995 for the following Explanation.- For the purposes of this sub- section, National Laboratory means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research or the Council of Scientific and Industrial Research and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed. 7. Inserted by the Finance No. 2 Act, 1980, w. e. f. 1- 9- 1980. 8. Inserted by the Finance Act, 1984, w. e. f. 1- 4- 1984. regard to the social, economic and industrial needs of India, he shall, subject to the provisions of this sub- section, be allowed a deduction of a sum equal to one and one- fourth times the amount. of the expenditure certified by the prescribed authority to have been so incurred during the previous year. b Where a deduction has been allowed under clause a for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause i of sub- section 1 or clause ia of sub- section 2 for the same or any other previous year. c Where a deduction is allowed for any previous year under this subsection in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under clause ii of sub- section 1 of section 32 for the same or any subsequent previous year. d Any deduction made under this sub- section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the programme, a certificate of its completion obtained from that authority, and the provisions of sub- section 5B of section 155 shall apply accordingly.
Where a deduction has been allowed under clause a for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause i of sub- section 1 or clause ia of sub- section 2 for the same or any other previous year.
Where a deduction is allowed for any previous year under this subsection in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under clause ii of sub- section 1 of section 32 for the same or any subsequent previous year.
Any deduction made under this sub- section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the programme, a certificate of its completion obtained from that authority, and the provisions of sub- section 5B of section 155 shall apply accordingly.
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 the prescribed authority, 2 whose decision shall be final.
The provisions of sub- section 2 of section 32 shall apply in relation to deductions allowable under clause iv of sub- section 1 as they apply in relation to deductions allowable in respect of depreciation.
Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company being an Indian company any asset representing expenditure of a capital nature on scientific research,- i the amalgamating company shall not be allowed the deduction under clause ii or clause iii of sub- section 2 and ii the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset. 1. Substituted for clauses i , ii , iia and iii of sub- section 1 or under sub- section 1A by the Taxation Laws Amendment and Miscellaneous Provisions Act, 1986, w. e. f. 1- 4- 1988. 3. Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1967. 2 Before allowing the deduction under the section, the Income- tax Officer shall call for from the sponsor contributor a certificate issued by the research association institution certifying inter alia the amount actually paid by the sponsor contributor to the research programme as approved and mentioned in the notification and also certifying that the total contribution received from all the sponsors contributors to the research programme as approved received from all the sponsors contributors do not exceed the cost of the programme, as approved by the prescribed authority. Circular No. 294, dated 27th February, 1981
the amalgamating company shall not be allowed the deduction under clause ii or clause iii of sub- section 2 and
the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset. 1. Substituted for clauses i , ii , iia and iii of sub- section 1 or under sub- section 1A by the Taxation Laws Amendment and Miscellaneous Provisions Act, 1986, w. e. f. 1- 4- 1988. 3. Inserted by the Finance No. 2 Act, 1967, w. e. f. 1- 4- 1967. 2 Before allowing the deduction under the section, the Income- tax Officer shall call for from the sponsor contributor a certificate issued by the research association institution certifying inter alia the amount actually paid by the sponsor contributor to the research programme as approved and mentioned in the notification and also certifying that the total contribution received from all the sponsors contributors to the research programme as approved received from all the sponsors contributors do not exceed the cost of the programme, as approved by the prescribed authority. Circular No. 294, dated 27th February, 1981