Income-tax (Fifth) Amendment Rules, 1998 - S.O.259 (E) - Income Tax

MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes) NOTIFICATION No. 10564 New Delhi, the 27th March, 1998 S.O.259 (E) .-In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby makes the following rule:- 1. (1) These rules may be called the Income-tax (Fifth) Amendment Rules, 1998. (2) They shall come into force with effect from the 1st day of April, 1998. 2. In the Income-tax Rules, 1962 , In rule 6 ,- (a) after sub-rule (1A), the following sub-rule shall be inserted namely:- (1B) For the purposes of sub-section (2AB) of section 35 , the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research. ; (b) after sub-rule (3), the following sub-rule shall be inserted, namely:- (4) The application required to be furnished by a company under sub-section (2AB) of section 35 shall be in Form No. 3CK ; (c) after sub-rule (5), the following sub-rule shall be inserted, namely:- (5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in form No. 3 CM: Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application: Provided further that an order under this rule shall be passed within two months of the receipt of application under sub-rule (4). ; (d) after sub-rule, (7), the following sub-rule shall be inserted namely:- (7) Approval of expenditure incurred on in house research and development facility by a company under sub-section (2AB) of section 35 shall be subject to the following conditions, namely :- (a) The facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature; (b) The prescribed authority shall submit its report in relation to the approval of in-house Research and Development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within sixty days of its granting approval; (c) The company shall maintain a separate account for each approved facility; which shall be audited annually and a copy thereof shall be furnished to the Secretary, Department of Scientific and Industrial Research by 31st day of October of each succeeding year, Explanation For the purposes of this sub-rule the expression audited means the audit of accounts by an accountant, as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961. (d) Assets acquired in respect of development of scientific research and development facility shall not be disposed off without the approval of the Secretary, Department of Scientific and Industrial Research ; (B) in Appendix II, after Form 3CJ the following Forms shall be inserted, namely :- FORM NO. 3CK Application form for entering into an agreement with the Department of Scientific and Industrial Research for cooperation in in-house Research and Development facility and for audit of the accounts maintained for that facility. PART A 1. Name and Address of the registered office of the company including Telex/Fax/Phone numbers 2. Permanent Account Number (PAN) of the company 3. Please specify the nature and Business/activity of the company-Manufacture/production of- Drugs Pharmaceuticals Electronic Equipments Computers. Telecommunications Equipments Chemicals Any other article or thing notified under subsection (2AB) of section 35 (please specify) 4. Annual production of the eligible products of the company during the past three years- 5. Annual expenditure on scientific research of the company during the past three years, giving break-up of expenditure on land and buildings. 6. Please give details of the nature of existing in-house research and development facilities including the address of the in-house Research and Development facility. 7. Registration number, date and validity of recognition granted by Department of Scientific and Industrial Research to the in-house research and Development centre of the company. 8. Proposed objectives of scientific research contemplated by the company. PART B AGREEMENT Whereas, . (hereinafter referred to as First Party) and the Department of Scientific and Industrial Research (hereinafter referred to as Second Party), have decided to enter into an agreement, that- (i) the First Party shall maintain an in-house Research and Development facility to be approved by the Second Party, (ii) the above Research and Development facility shall be exclusively used by the First Party to carry out scientific research relating to manufacture or production of any drugs, Pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the Central Board of Direct Taxes, under sub-section (2AB) of section 35 . (iii) the First Party shall provide full co-operation to the Second Party in carrying out the Research and Development work relating to manufactur or production of any drugs, Pharmaceuticals, electronic equipments, computers telecommunication equipments, chemicals or any other article or thing notified by the Central Board of Direct Taxes, under sub-section (2AB) of section 35 . (iv) the First Party shall maintain separate accounts for both revenue and capital expenditure on scientific research including that on in-house Research an Development facility, which shall be annually audited by an accountant as defined in section 288 (2) of the Income-tax Act, 1961 and a copy of which has to be attached with the return of income under sub-section (1) of section 139 to claim deduction under section 35 (2AB), (v) subject to the First Party meeting the conditions specified under sub-section (2AB) of section 35 , and on being satisfied of the feasibility of the said in-house Research and Development facility in terras of its objectives and of the genuineness of the expenditure on said Research and Development facility by the First Party, the Second Party shall submit its report in relation to the approval of the said facility to the Director General of Income-tax (Exemptions) within a period of sixty days from the date on which the First Party makes application in the Form No. 3CK. Agreed on the day of ......month of. .year. First Party ------------------- -------------------- Signature of the Principal Officer of the company (Name, Designation and address) Place . Date . Witness -------------------- signature (Name and address) Place Date Second Party ------------------- Signature of/on behalf of the Secretary, Department of Scientific Industrial Research Place . Date .. Witness ----------------------- signature (Name and address) Place Date .. PART C Certified that the above information is true to the best of our knowledge and belief. We undertake to : (i) maintain separate accounts for both revenue and capital expenditure on scientific research including that on in-house Research and Development facility, which shall be annually audited by an accountant as defined in sub-section (2) of section 288 of the Income-tax Act, 1961, and a copy of which has to be attached with the return of income under sub-section (1) of section 139 to claim deduction under subsection (2AB) of section 35 ; (ii) submit annual progress reports to the Secretary, Department of Scientific and Industrial Research; (iii) render full co-operation to the in carrying out the Research and Development work relating to manufacture or production of any drugs, Pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the Central Board of Direct Taxes, under sub-section (2AB) of section 35 ; and (iv) assets acquired by the approved facility will be utilised only for the approved Purpose and shall not be disposed off without the approval of the Secretary, Department of Scientific and Industrial Research. ------------------------ ----------------------- Signature of the Principal Officer of the company (Name, Designation and address) Place . Date . Notes: 1. Six sets of duly filled applications are to be submitted to the Secretary, Department of Science Industrial Research. 2. Copy of the latest Annual Report along with Balance Sheet has to be enclosed. 3. Enclose a copy of DSIR recognition of the in-house (R D) centre. FORM No. 3CL Report to be submitted by the prescribed authority to the Director General (Income-tax Exemptions) under section 35 (2AB) of the Income-tax Act, 1961 1. Name and Address of the registered office of the company including Telex/Fax/Phone numbers 2. Permanent Account Number (PAN) of the company Name and Designation of the Principal Officer of the company 3. Nature and Business/activity of the company Manufacture/production of- Drugs Pharmaceuticals Electronic Equipments Computers Telecommunications Equipments Chemicals Any other article or thing notified under subsection (2AB) of section 35. (please specify) 4. Annual production of the eligible products of the company during the past three years- 5. Proposed objectives of scientific research contemplated by the company. 6. Whether the nature of the business is related to the proposed objectives of the scientific research contemplated by the company. 7. Details of the nature of existing in-house Research and Development facilities specifying whether the in-house Research and Development facility is adequate for carrying out scientific research. 8. Whether recognition granted to the in-house Research and Development centre of the company by Department of Science and Industrial Research. 9. Total cost of in-house research facility, giving break-up; of expenditure on land and buildings. (ASSESSMENT YEAR-) 10. Whether agreement for co-operation and Research and, Development facility and for audit of the accounts maintained for that facility entered into. Certified that the above information is true to the best of our knowledge and belief. Place .., Date .. ------------------------------------ Signature of Secretary, DS1R FORM NO. 3CM Order of approval) of in-house research and development facility under section 35(2AB) of. the Income-tax Act. 1961 1 Name, Address and PAN of the company. 2. Nature of the business of the company-Manufacture/production of article or thing 3. Objectives of the scientific research to be conducted by in-house Research and Development facility 4. Address at which such Research Development facility is located 5. Ref. No. and Date of the application The above Research Development facility is approved for the purpose of section 35 (2AB) , subject to the conditions underlined therein. Place .. Date (Signature) (Name) Secretary, DSIR (Seal) . File No Order No . Copy t o : (1) Company (2) The Director General (Income-tax Exemption) [F. No. 142/23/97-TPL] DEEPA KRISHAN, Director (TPL-I)