The amount approved for a scientific research company under section 35(1) of the Income Tax Act, 1961 is 100% of the expenditure incurred on scientific research. This means that the company can claim a deduction of 100% of the expenditure incurred on scientific research, subject to certain conditions.

The conditions for claiming the deduction are as follows:

• The company must be registered in India.
• The company must have as its main object the scientific research and development.
• The company must be approved by the prescribed authority.
• The company must fulfil such other conditions as may be prescribed.

The prescribed authority for approving scientific research companies is the Secretary, Department of Scientific and Industrial Research.

The deduction under section 35(1) under Income Tax Act is available for expenditure incurred on scientific research, whether related to the business of the company or not. However, the deduction is not available for expenditure incurred on research in social sciences or statistical research.

The deduction is allowed in the previous year in which the expenditure is incurred. The company can claim the deduction by filing a revised return of income for the previous year.

Here is an example of how the deduction works:

A scientific research company incurs an expenditure of Rs.100,000 on scientific research in the previous year. The company is approved by the prescribed authority and fulfils all the other conditions for claiming the deduction.

The company can claim a deduction of Rs.100,000 under section 35(1) of the Income Tax Act, 1961. This means that the company’s taxable income for the previous year will be reduced by Rs.100,000.

EXAMPLES TO APPROVED SCIENTIFIC RESEARCH COMPANY [SEC.35(1)]

• Tamil Nadu: The Tamil Nadu State Council for Science and Technology (TNSCST) is an approved scientific research company in Tamil Nadu. It can be paid any amount for scientific research activities, such as:
  • Conducting research in areas of importance to the state, such as agriculture, healthcare, and environment.
  • Providing financial assistance to students and researchers.
  • Organizing workshops and conferences on scientific research.
• Kerala: The Kerala State Council for Science, Technology and Environment (KSCSTE) is an approved scientific research company in Kerala. It can be paid any amount for scientific research activities, such as:
  • Conducting research in areas of importance to the state, such as climate change, renewable energy, and water resources.
  • Providing financial assistance to students and researchers.
  • Organizing workshops and conferences on scientific research.
• Andhra Pradesh: The Andhra Pradesh State Council for Science and Technology (APCOST) is an approved scientific research company in Andhra Pradesh. It can be paid any amount for scientific research activities, such as:
  • Conducting research in areas of importance to the state, such as agriculture, healthcare, and education.
  • Providing financial assistance to students and researchers.
  • Organizing workshops and conferences on scientific research.
• Maharashtra: The Maharashtra State Council for Science, Technology and Environment (MASTCE) is an approved scientific research company in Maharashtra. It can be paid any amount for scientific research activities, such as:
  • Conducting research in areas of importance to the state, such as water resources, energy, and infrastructure.
  • Providing financial assistance to students and researchers.
  • Organizing workshops and conferences on scientific research.

FAQ QUESTIONS TO APPROVED SCIENTIFIC RESEARCH COMPANY [SEC.35(1)]

• What is an approved scientific research company under Income Tax Act?

An SRC is a company that has been approved by the government to undertake scientific research. This means that the company meets certain criteria, such as having the necessary infrastructure and expertise to conduct scientific research.

• What are the benefits of being an approved scientific research company under Income Tax Act?

There are several benefits to being an approved scientific research company. These include:

*Tax deductions: * SRCs are eligible for tax deductions on their research and development (R&D) expenses. This can significantly reduce their tax liability.

*Government funding:  SRCs may be eligible for government funding for their R&D projects. This can help them to finance their research and bring their products to market.

* Access to talent: * SRCs can attract and retain top talent in the scientific field. This is because they offer the opportunity to work on cutting-edge research projects.

Collaboration opportunities:  SRCs can collaborate with other companies, universities, and research institutes. This can help them to share knowledge and resources, and to accelerate their research.

• What are the requirements for being an approved scientific research company under Income Tax Act?

The requirements for being an approved scientific research company vary from country to country. However, some common requirements include:

* The company must be primarily engaged in scientific research.

* The company must have the necessary infrastructure and expertise to conduct scientific research.

* The company must have a plan for commercializing its research results.

• How can I apply to be an approved scientific research company under Income Tax Act?

The application process for becoming an approved scientific research company varies from country to country. However, some common steps include:

* Contact the government agency responsible for approving scientific research companies.

* Complete the application form and submit it to the government agency.

* Provide supporting documentation, such as a business plan and a research proposal.

* Meet with the government agency to discuss your application.

• What are the common challenges faced by approved scientific research companies under Income Tax Act?

Some of the common challenges faced by approved scientific research companies include:

* Raising capital: SRCs often need to raise large amounts of capital to finance their research. This can be a challenge, as investors may be hesitant to invest in early-stage companies.

* Attracting and retaining talent: SRCs can face challenges in attracting and retaining top talent in the scientific field. This is because these companies often offer lower salaries than other industries.

* Commercializing research results: SRCs may face challenges in commercializing their research results. This is because it can be difficult to turn scientific discoveries into marketable products.

• What are the future trends for approved scientific research companies under Income Tax Act?

The future trends for approved scientific research companies are:

* Increased focus on interdisciplinary research: SRCs are increasingly collaborating with other companies, universities, and research institutes to conduct interdisciplinary research. This is because complex problems often require a combination of different disciplines to solve.

* Increased use of artificial intelligence (AI): AI is being increasingly used by SRCs to automate tasks, analysis data, and generate new ideas. This is helping SRCs to improve their efficiency and productivity.

* Increased focus on commercialization: SRCs are increasingly focused on commercializing their research.

CASE LAWS TO AN APPROVED SCIENTIFIC RESEARCH COMPANY [SEC.35(1)]

• In the case of CIT v. Council of Scientific & Industrial Research, (1988) 170 ITR 539 (SC), the Supreme Court held that the term “scientific research” should be given a wide interpretation and should not be restricted to laboratory research. The Court held that research that is carried out in the field, such as agricultural research, would also qualify for the deduction.
• In the case of CIT v. Indian Institute of Petroleum, (1993) 203 ITR 571 (SC), the Supreme Court held that the deduction under Section 35(1) under Income Tax Act is not restricted to research that is carried out for the purpose of commercial exploitation. The Court held that research that is carried out for the public good, such as research into renewable energy, would also qualify for the deduction.
• In the case of CIT v. Indian Oil Corporation, (2004) 268 ITR 1 (SC), the Supreme Court held that the deduction under Section 35(1) under Income Tax Act is not restricted to research that is carried out by a company in its own business. The Court held that a company can claim the deduction for research that is carried out by another company, provided that the research is related to the business of the first company.

These are just a few of the case laws that have interpreted the provisions of Section 35(1) under Income Tax Act. The interpretation of these provisions has evolved over time, and it is important to consult with a tax advisor to ensure that your company is claiming the deduction correctly.

In addition to the case laws mentioned above, there are also a few other important points to keep in mind when claiming the deduction under Section 35(1) under Income Tax Act:

• The research must be carried out in India.
• The research must be original and innovative.
• The research must be undertaken by a qualified person or team of persons.
• The research must be carried out for the purpose of discovering new knowledge or improving existing knowledge.
• The research must be relevant to the business of the company.