Notification No. 309/2006-Income Tax Dated 30/10/2006

NOTIFICATION NO. 309/2006, DATED 30-10-2006

In exercise of the powers conferred by section 295 read with clause ( ii) and clause (iii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby make the following rules further to amend the Income-tax Rules, 1962 namely:–

1. (1) These rules may be called the Income-tax (Twelfth Amendment) Rules, 2006.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962,–

(a) after rule 5B, the following rules shall be inserted, namely:–

“5C. Guidelines, form and manner in respect of approval under clause (ii) and clause (iii) of sub-section (1) of section 35-(1) An application for approval,–

(i) under clause (ii) of sub-section (1) of section 35 by a scientific research association in duplicate in Form No. 3CF-I;

(ii) under clause (ii) or clause (iii) of sub-section (1) of section 35 by a university, college or other institution in duplicate in Form No. 3CF-II shall be made, at any time during the financial year immediately preceding the assessment year from which the approval is sought, to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the applicant.

(2) Annexure to the application in Form No. 3CF-I shall be filled out if the association claims exemption under clause (21) of section 10 of the Income-tax Act.

(3) The applicant shall send a copy of the application in Form No. 3CF-I or, as the case may be, Form No. 3CF-II to Member (IT), Central Board of Direct Taxes accompanied by the acknowledgement receipt as evidence of having furnished the application Form in duplicate in the office of the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case.

(4) The period of one year, as specified in the fourth proviso to sub-section (1) of section 35, before the expiry of which approval is to be granted or the application is to be rejected by the Central Government shall be reckoned from the end of the month in which the application Form from the applicant for approval is received in the office of Member (IT), Central Board of Direct Taxes.

(5) If any defect is noticed in the application in Form No. 3CF-I or Form No. 3CF-II or if any relevant document is not attached thereto, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall serve a deficiency letter on the applicant, before the expiry of one month from the date of receipt of the application Form in his office.

(6) The applicant shall remove the deficiency within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf may be extended, so however, that the total period for removal of deficiency does not exceed thirty days, and if the applicant fails to remove the deficiency within the period of thirty days so allowed, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall send his recommendation for treating the application as invalid to the Member (IT), Central Board of Direct Taxes.

(7) The Central Government, if satisfied, may pass an order treating the application as invalid.

(8) If the application Form is complete in all respects, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax, may make such inquiry as he may consider necessary regarding the genuineness of the activity of the association or university or college or other institution and send his recommendation to the Member (IT) for grant of approval or rejection of the application before the expiry of the period of three months to be reckoned from the end of the month in which the application Form was received in his office.

(9) The Central Government may before granting approval under clause (ii) or clause (iii) shall call for such documents or information from the applicant as it may consider necessary and may get any inquiry made for verification of the genuineness of the activity of the applicant.

(10) The Central Government may, under sub-section (1) of section 35, issue the notification to be published in the Official Gazette granting approval to the association or university or college or other institution or for reasons to be recorded in writing reject the application.

(11) The Central Government may withdraw the approval granted under clause (ii) or clause (iii) of sub-section (1) of section 35 if it is satisfied that the scientific research association or university or 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 under rule 5D or rule 5E.

(12) No order treating the application as invalid or rejecting the application or withdrawing the approval, shall be passed without giving a reasonable opportunity of being heard to the scientific research association or university or college or other institution.

(13) A copy of the order invalidating or rejecting the application or withdrawing the approval shall be communicated to the applicant, the Assessing Officer and the Commissioner of Income-tax or, as the case may be, the Director of Income-tax.

Conditions subject to which approval is to be granted to a Scientific Research Association under clause (ii) of sub-section (1) of section 35.

5D.   (1) The sole object of the applicant scientific research association shall be to undertake scientific research.

(2) The applicant scientific research association shall carry on the scientific research activity by itself.

(3) The scientific research association seeking approval under clause ( ii) of sub-section (1) of section 35 shall maintain books of account and get such books audited by an accountant as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4) The scientific research association shall maintain a separate statement of donations received and amount applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(5) If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the scientific research association,–

(a) is not maintaining books of account, or

(b) has failed to furnish its audit report, or

(c) has not furnished its statement of the sums received and the sums applied for scientific research, or

(d) has ceased to carry on its research activities, or its activities are not genuine, or

(e) is not fulfilling the conditions subject to which approval was granted to it

he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under sub-section (1) of section 139.

5E. Conditions subject to which approval is to be granted to a University, College or other Institution under clause (ii) and clause (iii) of sub-section (1) of section 35. (1) The sum paid to a university, college or other institution shall be used for scientific research and research in social science or statistical research.

(2) The applicant university, college or other institution shall carry out scientific research, research in social science or statistical research through its faculty members or its enrolled students.

(3) A university or college or other institution approved under clause (ii) or clause (iii) of sub-section (1) of section 35 shall maintain separate books of account in respect of the sums received by it for scientific research or, as the case may be, for research in social science or statistical research, reflect therein the amount used for carrying out research, get such books of account audited by an accountant, as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4) The university or  college  or other institution shall  maintain a separate statement of donations received and the amount used for research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(5) If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the university or college or other institution,-

(a) is not maintaining separate books of account for research activities, or

(b) has failed to furnish its audit report, or

(c) has not furnished its statement of the sums received and the sums used for research, or

(d) has ceased to carry on its research activities, or its activities are not genuine, or

(e) is not fulfilling the conditions subject to which approval was granted to it,

he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under section 139(1).”

(b) in rule 6, sub-rule (2) shall be omitted;

(c) in Appendix II, for Form No. 3CF, the following Forms shall be substituted, namely:–

“Form No. 3CF-l

[See rules 5C and 5D]

Application Form for approval under clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 in the case of a Scientific Research Association

1.

(i)

Name and address of the registered office of the Association.

(ii)

Enclose a copy of the Trust Deed/Deed of Registration/Memorandum and Articles of Association, and if the Association was approved earlier, furnish  approval number and date of the latest notification.[Please enclose a copy]

(iii)

If approval was withdrawn in the past, mention reasons on account of which the approval was withdrawn [Enclose a copy of the Order/Orders withdrawing approval/approvals].

(iv)

Date from which approval is sought for.

2.

Legal status of the Association:

Whether Registered Society or Company or Others. (Enclose a copy of certificate of registration/incorporation

3.

Object of the scientific research association.

4.

(i)

Address(es) of the research laboratory of the Association.

(ii)

Year of establishment.

(iii)

Name and address of the Officer of the Association in-charge of the laboratory/research facility.

(iv)

Total number of employees engaged in research activity carried on by the Association.

5.

List of research facilities or assets owned by the Association:

(i)

Plant and machinery.

(ii)

Land and building along with cost of acquisition.

(iii)

Any other research facility/asset with cost of acquisition.

6.

Research subjects and projects undertaken by  the Association:

(i)

Research projects completed by the association during the last three years, if any.

(ii)

Research projects, which have been taken up during the year and research projects which are underway from the past years

(iii)

Research papers published in any eminent national or International Research Journal

7.

Other scientific research related details:

(i)

New products, processes, methods, techniques developed.

(ii)

Improvements in the existing products, processes, methods, techniques.

(iii)

Products of import substitution.

(iv)

Patents filed, obtained, if any, and if so, in whose name?

(v)

Whether products, processes methods and techniques mentioned at (i) above have been commercialized or implemented and if so, by whom?

(vi)

Earnings from patents or registered trade marks, if any.

8.

Enclose details of seminars, conferences, workshops and training courses, etc., conducted by the Association during the last three years and a brief note regarding the relevance of such exchanges to the research area or activity carried on by the Association.

9.

Programmes contemplated for research in future and financial projections to meet the likely expenditure on such programmes.

10.

(i)

Sources of income of the Association (for the last three years)

(ii)

Indicate assessment particulars:

(PAN, Ward/Circle, if assessed to tax)

(iii)

When was the last return of income furnished?

11.

Amounts received by the Scientific Research Association and actually applied for research by it during the last three years:

Year

Amounts received

Amounts actually utilized for research out of the amounts at column (2)

(1)

(2)

(3)

Donation

Grant

Total

12.

Attach a list of donors giving their names, complete postal addresses and the amounts paid by each of them to the association during the last three years. (Mention PAN of donors paying the sums in excess of fifty thousand rupees)

13.

Enclose the copy of audited annual accounts of the association for the last three years.

14.

Investments made out of the amounts not utilised for research during the year mentioned at item 10 above:

(i)

Fixed deposits with banks

(ii)

Fixed deposits with companies

(iii)

Government securities

(iv)

Shares, Debentures, etc.

(v)

Cash in hand

(vi)

Others, if any, not covered under (i) to (v)

Certified that the above inforrmation is true to the best of my knowledge and belief.

Place

……………………….

……………………………

Date

……………………….

Signature

Designation

Address

ANNEXURE

To be furnished by a Scientific Research Association claiming exemption under section 10 (21)

Financial Year …………

1.

Total income of the Association including voluntary contributions received during the year.

2.

Amount of income referred to at item 1 above that has been or deemed to have been applied wholly and exclusively for the objects of the Association.

3.

Amount accumulated for the objects of the Association.

4

(i)

Details of modes in which the funds of the association are invested or deposited showing nature, value and income from such investments or deposits.

(ii)

Details of funds not invested in modes specified in section 11(5):

5.	(i)		Is the association carrying on any business (give details) ?
	(ii)		Is the business incidental to the attainment of its object ?
	(iii)		Are separate books of account maintained in respect of such business ?
6.	Details regarding the nature, quantity and value of contributions (other than cash and the manner in which such contribution have been utilized).
7.	Details of shares, security or other property purchased by or on behalf of the association from:
	(i)		the founder of the association,
	(ii)		any person who has made a contribution exceeding rupees one lakh to the association,
	(iii)		any member of a Hindu undivided family where the Hindu undivided family is a founder,
	(iv)		the manager (by whatever name called) of the association,
	(v)		a relative of the founder, member or the manager,
	(vi)		any concern in which any of the persons referred to in sub-items (i) to (v ) has a substantial interest.
8.	Whether any part of the income or any property of the association was used or applied, in a manner which results directly or indirectly in conferring any benefit, amenity or perquisite (whether converted into money or not) on any interested person. If so, the details thereof.
9.	Amount deemed to be income of the association by virtue of section 11(3), as applicable by the first proviso to section 10(21)
Certified that the above information is true to the best of my knowledge and belief.
Place		………………			………………………
Date		………………			Signature
					Designation
					Full Address

Form No. 3CF-II

[See rules 5C and 5E ]

Application Form for approval under clause (ii) or clause (iii) of sub-section (1) of section 35 of the Income-tax Act, 1961 in the case of a University, College or other Institution

[F. No. 142/35/2006-TPL]