The Hindu Business Line : Approval process for R&D related tax benefit decentralised

R&D boost
To supplement the efforts of the Universities and approved scientific research associations, the Government has now allowed this weighted tax deduction benefit even for payments made to companies involved in commercial R&D.

K.R. Srivats

New Delhi, Dec. 30 Outsourcing of scientific research, particularly by small and medium enterprises, to companies involved in commercial R&D may soon get a boost.

The Central Board of Direct Taxes (CBDT) has issued guidelines for obtaining tax benefits on the payment made by a company to another company for conducting scientific research on its behalf.

The tax benefit will be decided at the level of the Chief Commissioner. This decentralisation means that companies will not be required to come to the CBDT at Delhi for approval, official sources said.

In budget 2008-09, the Government allowed 125 per cent weighted deduction to a person making payment to a company to be used for scientific research. This tax benefit goes to the payer, but the company involved in R&D and receiving such paymnets should have been approved by the tax department for this purpose.

The approval process has now been spelt out by the CBDT, along with conditions to be fulfilled. Also, a form, whose format has been specified, has been issued for making the approval application.

So far, only payments made to approved scientific research associations, approved university, college or other institutions, to be used for scientific research were eligible for weighted deduction to the extent of 125 per cent of the sum paid.

To supplement the efforts of the Universities and approved scientific research associations, the Government has now allowed this weighted tax deduction benefit even for payments made to companies involved in commercial R&D.

As part of the conditions specified under the guidelines, the CBDT has said that the applicant company would have to carry on scientific research through its own employees using its own assets. This would imply that an applicant company cannot outsource scientific research.

Besides maintaining separate books of account for the sums received by it for scientific research and the amount used for such purpose, the applicant company should also get the books of accounts audited and submit it to the Commissioner of Income-Tax having jurisdiction over the case.

After obtaining approval from the tax department, the company should every year, by due date for furnishing its return of income, furnish a statement to the Chief commissioner containing detailed note on the research work undertaken by it during the “previous year”.

It should also have a summary of research articles published in national or international journals during the year. There should also be information about any patents or similar rights applied for or registered during the year. Also, programme of research projects to be undertaken during the forthcoming year and the financial allocation for such subjects should be specified, the CBDT has said.

More Stories on : Science & Technology | Research & Development | Taxation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page