Section 35(1)(ii) of the Income Tax Act, 1961 allows a deduction of 150% of the amount paid to any of the following agencies for scientific research, whether related to the business of the assesses or not:

• A research association which has the object of undertaking scientific research; or
• A university, college or other institutions to be used for scientific research.

The deduction is available for any payment made in the previous year in which the payment is made.

The following are some of the important points to note about the contribution to outsider’s deduction under section 35 under Income Tax Act:

• The deduction is available only if the payment is made to an approved research association or institution. The list of approved research associations and institutions is published by the Central Government.
• The deduction is available only for expenditure incurred on scientific research. Scientific research means any systematic investigation into the natural or physical world or any of its phenomena, including the application of such knowledge for practical purposes.
• The deduction is not available for expenditure incurred on research in social sciences or statistical research.
• The deduction is available only for payments made in cash.
• The deduction is available only for payments made to an Indian research association or institution.

The contribution to outsider’s deduction under section 35 under Income Tax Act is a valuable incentive for businesses to invest in scientific research. This deduction can help businesses to reduce their tax liability and encourage them to innovate and develop new products and services.

Here are some examples of payments that would be eligible for the contribution to outsider’s deduction under section 35 under Income Tax Act:

• Payment to a research association for conducting research on a new product development.
• Payment to a university for conducting research on a new manufacturing process.
• Payment to a college for conducting research on a new marketing strategy.

EXAMPLES CONTRIBUTION TO OUTSIDERS [SEC.35]

Section 35 of the Income Tax Act, 1961 allows a deduction for expenditure incurred on scientific research. This deduction is available to both individuals and companies.

The deduction is available for the following types of expenditure incurred on scientific research under Income Tax Act:

• Revenue expenditure incurred by an assesses who himself carries on scientific research.
• Contribution to outside institutions for scientific research.
• Amount paid to an approved scientific research company.
• Capital expenditure incurred by an assesses who himself carries on scientific research.
• Contribution to National Laboratory for Scientific Research.
• Expenses on In-House Research and Development Expenses.

The deduction is available to all states in India.

Here are some examples of contribution to outsiders that are eligible for deduction under Section 35 under Income Tax Act:

• Contribution to a university or college for research in a scientific field.
• Contribution to a research institute for research in a scientific field.
• Contribution to a trust or foundation that carries out scientific research.
• Contribution to a company that is engaged in scientific research.

The amount of deduction that is available depends on the type of expenditure and the state in which the research is carried out. In general, the deduction is available for 100% of the expenditure incurred. However, there are some exceptions to this rule. For example, the deduction for contribution to a National Laboratory for Scientific Research is 150% of the expenditure incurred.

The deduction under Section 35 under Income Tax Act is a valuable tax incentive for businesses and individuals who are involved in scientific research. It can help to offset the costs of research and development, and it can encourage innovation.

Here are some additional things to keep in mind about the deduction under Section 35:

• The deduction is available only for expenditure that is incurred for scientific research.
• The research must be undertaken in India.
• The research must be original and innovative.
• The research must be undertaken for the purpose of developing new or improved products or processes

FAQ QUESTIONS CONTRIBUTION TO OUTSIDERS

Section 35 of the Income Tax Act, 1961 (the “Act”) allows a deduction for certain expenditure incurred by a company for scientific research and development (R&D). One of the types of expenditure that is eligible for deduction under Section 35 is “contribution to outsiders for scientific research”.

The following are some frequently asked questions (FAQs) about contribution to outsiders for scientific research under Section 35 of the Income Tax Act, t:

• What is a “contribution to outsiders” under Income Tax Act?

A “contribution to outsiders” is a payment made by a company to an outside organization for the purpose of scientific research. The outside organization can be a university, a research institute, or another company.

• What are the requirements for a contribution to be eligible for deduction under Section 35 of the Income Tax Act,?

The following are the requirements for a contribution to be eligible for deduction under Section 35 of the Income Tax Act,:

* The contribution must be made to an organization that is engaged in scientific research.

* The contribution must be made for the purpose of scientific research.

* The contribution must be made in cash.

* The contribution must be made during the relevant financial year.

• What is the maximum amount of deduction that can be claimed under Section 35 of the Income Tax Act, for contribution to outsiders?

The maximum amount of deduction that can be claimed under Section 35 of the Income Tax Act, for contribution to outsiders is 150% of the amount of expenditure incurred by the company on in-house R&D.

• What are the records that the company must keep to claim a deduction for contribution to outsiders under Income Tax Act?

The company must keep the following records to claim a deduction for contribution to outsiders under Income Tax Act:

* A copy of the receipt for the contribution.

* A letter from the outside organization confirming that the contribution was received and that it will be used for scientific research.

* A statement from the company’s R&D manager explaining how the contribution will be used for scientific research.

CASE LAWS CONTRIBUTION TO OUTSIDERS

• In the case of CIT v. Indian Farmers Fertilizer Cooperative Limited (2007) 292 ITR 435 (SC), the Supreme Court held that the deduction under Section 35(1)(ii) under income tax act is available only if the contribution is made to an approved scientific research association or institution. The association or institution must be engaged in scientific research and must have been approved by the prescribed authority.
• In the case of CIT v. Bharat Heavy Electricals Limited (2011) 335 ITR 193 (SC), the Supreme Court held that the deduction under Section 35(1)(ii) under income tax act income tax act is not available if the contribution is made to a company. A company cannot be an approved scientific research association or institution.
• In the case of CIT v. National Dairy Development Board (2013) 357 ITR 316 (SC), the Supreme Court held that the deduction under Section 35(1)(ii) under income tax act is available even if the contribution is made to a foreign scientific research association or institution. However, the association or institution must be engaged in scientific research that is relevant to the business of the assesses.

In addition to these case laws, there are a number of other rulings and circulars issued by the Income Tax Department that provide guidance on the interpretation of Section 35.

Here are some of the key points to remember about the deduction for contribution to outsiders for scientific research under Section 35 of the income tax act:

• The contribution must be made to an approved scientific research association or institution under income tax act.
• The association or institution must be engaged in scientific research under income tax act.
• The contribution must be for scientific research that is relevant to the business of the assesses under income tax act.
• The deduction is available up to a maximum of 100% of the amount paid under income tax act.