(1)In respect of expenditure on scientific research, the following deductions shall be allowed-(i)any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business.[Explanation. - Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [as defined in Explanation 2 below sub-section (5) of section 40A to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority (See rule 6(1). The prescribed authority under rule 6(1) is Director General (Income-tax Exemptions) in concurrence with Secretary, Department of Scientific and Industrial Research, Government of India.) to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced; ](ii)an amount equal to one and one-fourth times of any sum paid [ Substituted by Act 27 of 1999, Section 15, for " any sum paid" (w.e.f. 1.4.2000).] to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research [See rules 5C [Guidelines, form and manner in respect of approval u/s 35(1)(ii)/(iii)], 5D [Conditions subject to which approval is to be granted u/s 35(1)(ii)/(iii) to research association] and 5E [Conditions subject to which approval is to be granted u/s 35(1)(ii)/(iii) to University, college or other institution] and Form Nos. 3CF-I and 3CF-II.]:[Provided that such association, university, college or other institution for the purposes of this clause-(A)is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and(B)such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government;]Provided further that where any sum is paid to such association, university, college or other institution in a previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, the deduction under this clause shall be equal to the sum so paid;(iia)any sum paid to a company to be used by it for scientific research:Provided that such company—(A)is registered in India,(B)has as its main object the scientific research and development,(C)is, for the purposes of this clause, for the time being approved by the prescribed authority in the prescribed manner, and(D)fulfils such other conditions as may be prescribed [See rule 5F [Prescribed authority, guidelines, form, manner and conditions for approval u/s 35(1)(iia)] and Form No. 3CF-III.];(iii)any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research :[Provided that such university, college or other institution for the purposes of this clause-(A)is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and(B)such university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government.]Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution 10to which clause (ii) or clause (iii) or to a company to which clause (iia)] applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in [Sub. for "clause (ii) or clause (iii)" by the Act. No. 38 of 2020, w.e.f. 1-4-2021. Earlier, the quoted words were amended by the Act. No. 38 of 2020, w.r.e.f. 1-6-2020 and Act No. 12 of 2020, w.e.f. 1-6-2020.] [clause (ii) or clause (iii) or to a company referred to in clause (iia)] has been withdrawn;(iv)in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub-section (2) :Provided that the research association, university, college or other institution referred to in clause (ii) or clause (iii) shall make an application in the prescribed form and manner to the Central Government for the purpose of grant of approval, or continuance thereof, under clause (ii) or, as the case may be, clause (iii) :Provided further that the Central Government may, before granting approval under clause (ii) or clause (iii), call for such documents (including audited annual accounts) or information from the research association, university, college or other institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the research association, university, college or other institution and that Government may also make such inquiries as it may deem necessary in this behalf :Provided also that any notification issued, by the Central Government under clause (ii) or clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, every notification under clause (ii) or clause (iii) shall be issued or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received by the Central Government:[Provided also that every notification under clause (ii) or clause (iii) in respect of the research association, university, college or other institution or under clause (iia) in respect of the company issued on or before the date on which this proviso has come into force, shall be deemed to have been withdrawn unless such research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) makes an intimation in such form and manner, as may be prescribed, to the prescribed income-tax authority within three months from the date on which this proviso has come into force, and subject to such intimation the notification shall be valid for a period of five consecutive assessment years beginning with the assessment year commencing on or after the 1st day of April, 2022:Provided also that any notification issued by the Central Government under clause (ii) or clause (iia) or clause (iii), after the date on which the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 receives the assent of the President‡, shall, at any one time, have effect for such assessment year or years, not exceeding five assessment years as may be specified in the notification.] [Ins. by the Act. No. 38 of 2020, w.e.f. 1-4-2021. Earlier, fifth and sixth provisos were Ins. by the Act No. 12 of 2020, w.e.f. 1-6-2020 and later on Omtt. by the Act. No. 38 of 2020, w.r.e.f. 1-6-2020.]
