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Income tax exemption-query

vaishali (student) (30 Points)

13 July 2012

I need to know, in which section of I.T act --R & D expenses for manufacturing and design of plastic moulds and manufacturing of cooler, geysers other home appliances is applicable.

Also, tax exemption information if any, regarding the same.

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6 Replies

Vineet Kumar Sharma (Chartered Accountant) (316 Points)
Replied 13 July 2012

Since, the Research & Deve. Expenses on Designing is not a scientific research and there is no any specific section which deals it.

Hence, such an expenditure is allowable u/s 37.

vaishali (student) (30 Points)
Replied 14 July 2012

Originally posted by : Vineet Kumar Sharma
	Since, the Research & Deve. Expenses on Designing is not a scientific research and there is no any specific section which deals it. Hence, such an expenditure is allowable u/s 37.

We are not only into designing of electrical goods but also in manufacturing of them.

I have heard if UNDER SECTION 35(2AB) OF IT ACT 1961 can be useful in my case??

Thanks

Vineet Kumar Sharma (Chartered Accountant) (316 Points)
Replied 17 July 2012

Ms. Vaishali!!

I am producing the language of Section 35(2AB) for your reference and afterward give you its interpretation.

"(2AB)(1) Where a company engaged in the business of manufacture or production of any drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals or any other article or thing notified by the Board incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred.

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director-General in such form and within such time as may be prescribed."

Vineet Kumar Sharma (Chartered Accountant) (316 Points)
Replied 17 July 2012

Ms. Vaishali!!

I am reproducing the language of Section 35(2AB) for your reference and afterward give you its interpretation.

"(2AB)(1) Where a company engaged in the business of manufacture or production of any drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals or any other article or thing notified by the Board incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred.

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

Vineet Kumar Sharma (Chartered Accountant) (316 Points)
Replied 17 July 2012

You are entitled to have a 200% of expenditure incurred either Revenue or Capital (excluding land & building) u/s 35(2AB) only if:-.

1. You are doing inhouse R&D.

2. Such R&D facility must be approved by prescribed authority.

3. If you have entered into an agreement with prescribed authority for co-operation in R&D facility and get accounts audited.

If you are satisfying all the conditions simultaneously, then you are entitled to get deduction. You have not mentioned the fact of approval from authority. Hence, it is little bit harder to say that you are entitled for deduction.

Vineet Kumar Sharma (Chartered Accountant) (316 Points)
Replied 17 July 2012

Hope your query have been resolved now.....

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Income tax exemption-query

6 Replies

Since, the Research & Deve. Expenses on Designing is not a scientific research and there is no any specific section which deals it.

Hence, such an expenditure is allowable u/s 37.

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Ms. Vaishali!!

I am producing the language of Section 35(2AB) for your reference and afterward give you its interpretation.

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director-General in such form and within such time as may be prescribed."

Ms. Vaishali!!

I am reproducing the language of Section 35(2AB) for your reference and afterward give you its interpretation.

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

You are entitled to have a 200% of expenditure incurred either Revenue or Capital (excluding land & building) u/s 35(2AB) only if:-.

1. You are doing inhouse R&D.

2. Such R&D facility must be approved by prescribed authority.

3. If you have entered into an agreement with prescribed authority for co-operation in R&D facility and get accounts audited.

If you are satisfying all the conditions simultaneously, then you are entitled to get deduction. You have not mentioned the fact of approval from authority. Hence, it is little bit harder to say that you are entitled for deduction.

Hope your query have been resolved now.....

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