Section 35 of the Income-tax Act provides for deduction in respect of expenditure on research and development. The existing provisions of section 35(1)(ii) provide for a weighted deduction from business income to the extent of 125 per cent of any sum paid to an approved and notified scientific research association or to a university, college or other institution to be utilized for scientific research. Section 35(1)(iii) provides similar deduction if the sum is paid to an approved and notified university, college or other institution to be used to carry on research in social science or statistical research. Section 80GGA allows deductions for donations made to such association, universities, etc.
Under section 10(21), exemption is granted in respect of the income of a scientific research association which is approved and notified under section 35(1)(ii). The university, college or other institutions which are approved either under section 35(1)(ii) or under section 35(1)(iii) also qualify for exemption of their income under section 10(23C) of the Act subject to specified conditions.
The associations which are engaged in undertaking research in social science or statistical research are not currently covered by the provisions of section 35(1 )(iii). Such research associations are also not entitled to exemption in respect of their income.
It is now proposed to amend section 35(1)(iii) so as to include an approved research association which has as its object undertaking research in social science or statistical research. It is also proposed to amend section 10(21) so as to also provide exemption to such associations in respect of their income. This exemption will be subject to the same conditions under which an approved research association undertaking scientific research is entitled to exemption in respect of its income. An amendment to include allowability of deductions for donations made to such associations is also proposed.
These amendments are proposed to take effect from 1st April 2011 and will, accordingly, apply in relation to the assessment year 2011-12 and subsequent years.
