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Research units to get one-time nod for tax exemption
November, 04th 2006

Heres goods news for those investing in research and development. In what could give a big leg-up to investments in R&D, the Central Board of Direct Taxes (CBDT) has streamlined procedure for approval to scientific institutions. These institutions will now need only a one-time approval from the government.

Under Section 35 of the Income Tax Act, deduction is allowed on the expenditure on account of scientific research, research in social science or statistical research. However, for claiming deduction on the expenditure, the research institution had to be approved by the department and renewed annually. The CBDT has now amended this by a notification. Now, scientific research institutions will need only a one-time approval, an official statement said.

This meets a long-standing demand of the scientific research institutions, which will help them in raising funds and could also spur investment in R&D activity in the country. The one-time approval can be withdrawn only if the government feels that the scientific research association, university, college or other institution has ceased its activities or its activities are not genuine or are not being carried out in accordance with all or any of the conditions prescribed.

The CBDT has also notified a new application form for this purpose. The amended provision now provides for time-bound disposal of applications for approval. Approval is to be granted or rejected before expiry of one year from the end of the month, in which the copy of the application form is received by CBDT.

An application for approval in the given Forms No 3CF-I or 3CF-II is to be made, at any time during the financial year immediately preceding the assessment year, from which the approval is sought. The application should be made to the commissioner of income-tax or the director of income-tax having jurisdiction over the applicant.

The CBDT has provided separate forms for scientific research association and for a university, college or other institution. Form No 3CF-I is meant for application by a scientific research association and form No 3CF-II for application by a university, college or other institution.

For approval of a scientific research association, the sole object of the association should be to undertake scientific research and it should be carried out by the association itself. In the case of a university, college or other institution, research should be carried out through its faculty members or enrolled students.

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