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Allow weighted deduction U/s. 35(2AB) to IT & ITES sectors: ICAI

Currently, there is no clarity whether a company engaged in the business of development and sale of software or providing IT / Information Technology Enabled Services (ITES) services, is eligible for weighted deduction on the R&D expenditure incurred by it.

IT and ITES sectors should also be entitled to weighted deduction under Section 35(2AB) of the Act

Issue/Justification

Currently, there is no clarity whether a company engaged in the business of development and sale of software or providing IT / Information Technology Enabled Services (ITES) services, is eligible for weighted deduction on the R&D expenditure incurred by it.

As per DSIR guidelines amount spent by a recognized in-house R&D unit towards foreign consultancy, building maintenance, foreign patent filing etc. are not eligible for weighted deduction under Section 35(2AB) of the Act. Such expenditure are essential in carrying out research at the approved R&D centers.

Suggestion

It suggested to amend provisions of Section 35(2AB) of the Act to specifically include R&D with respect to the development and sale of software and providing relevant IT/ITES services.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)
Categories: Income Tax
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