Category: I.T Notifications 2011

It is hereby notified for general information that the organization Institute for Financial Management and Research, Chennai has been approved by the Central Government for the purpose of clause (iii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2009-10 onwards in the category of ‘Institution’, partly engaged in research activities subject to the following conditions, namely:—

  (i)  The sums paid to the approved organization shall be utilized for research in social sciences;

 (ii)  The approved organization shall carry out research in social science or statistical research through its faculty members or its enrolled students;

(iii)  The approved organization shall maintain separate books of account in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the Explanation to sub-section (2) of section 288 of the said Act 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 of the said Act;

 (iv)  The approved organization shall maintain a separate statement of donations received and amounts applied for research in social science and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2. The Central Government shall withdraw the approval if the approved organization:—

 (a)  fails to maintain separate books of account referred to in sub-paragraph (iii) of paragraph 1; or

 (b)  fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or

  (c)  fails to furnish its statement of the donations received and sums applied for research in social science or statistical research referred to in sub-paragraph (iv) of paragraph 1; or

 (d)  ceases to carry on its research activities or its research activities are not found to be genuine; or

  (e)  ceases to conform to and comply with the provisions of section 35 of the said Act read with rules 5C and 5E of the said Rules.

Reference: Section 35 of the income Tax Act, 1961

(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 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 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 three-fourth times of any sum paid to a 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 :

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;

(iia)  an amount equal to one and one-fourth times of 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;

(iii) an amount equal to one and one-fourth times of 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 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.

Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) 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 clause (ii) or clause (iii) 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 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.

(2) For the purposes of clause (iv) of sub-section (1),—

(i)  in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal installments for each of the four immediately succeeding previous years ;

(ia)  in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year
shall be deducted for that previous year :

Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984.

Explanation 1.—where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced.

[Explanation 2.—For the purposes of this clause,—

 (a)  “land” includes any interest in land ; and

 (b)  the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), the date on which he has so taken or retained possession of such land or part ;

(ii)  notwithstanding anything contained in clause (i), where an asset representing expenditure of a capital nature incurred before the 1st day of April, 1967, ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause (i) falls short of the said expenditure, then—

 (a)  there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and

 (b)  no deduction shall be allowed under that clause for that previous year or for any subsequent previous year ;

(iii)  if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation ; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place ;

(iv)  where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clause (ii) of sub-section (1)] of section 32 for the same or any other previous year in respect of that asset ;

(v)  where the asset mentioned in clause (ii) is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under clause (ii) of sub-section (1)] of section 32.

(2A) Where, before the 1st day of March, 1984, the assessee pays any sum (being any sum paid with a specific direction that the sum shall not be used for the acquisition of any land or building or construction of any building) to a scientific research association or university or college or other institution referred to in clause (ii) of sub-section (1) or to a public sector company to be used for scientific research undertaken under a program approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, then,—

(a)  there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid ; and

(b)  no deduction in respect of such sum shall be allowed under clause (ii) of sub-section (1) for the same or any other assessment year.

[Explanation.—For the purposes of this sub-section, “public sector company” shall have the same meaning as in clause (b) of the Explanation below sub-section (2B) of section 32A.

(2AA)
Where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person] with a specific direction that the said sum shall be used for scientific research undertaken under a program approved in this behalf by the prescribed authority, then—

(a)  there shall be allowed a deduction of a sum equal to two times the sum so paid ; and

(b)  no deduction in respect of such sum shall be allowed under any other provision of this Act :

Provided that the prescribed authority shall, before granting approval, satisfy itself about the feasibility of carrying out the scientific research and shall submit its report to the Director General in such form as may be prescribed.

Explanation 1.—The deduction, to which the assessee is entitled in respect of any sum paid to a National Laboratory, University, Indian Institute of Technology or a specified person for the approved program referred to in this sub-section, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to,—

(a)  Such Laboratory, or specified person has been withdrawn; or

(b)  the programe, undertaken by the National Laboratory, University, Indian Institute of Technology or specified person, has been withdrawn.

Explanation [2].—For the purposes of this section,—

(a)  “National Laboratory” means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio-Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed ;

(b)  “University” shall have the same meaning as in Explanation to clause (ix) of section 47 ;

(c)  “Indian Institute of Technology” shall have the same meaning as that of “Institute” in clause (g) of section 3of the Institutes of Technology Act, 1961

(d)  “specified person” means such person as is approved by the prescribed authority.

(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred.

Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed.

(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2012

(6) No deduction shall be allowed to a company approved under sub-clause (C) of clause (iia) of sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2008.

(2B)(a) Where, before the 1st day of March, 1984 an assessee has incurred any expenditure (not being in the nature of capital expenditure incurred on the acquisition of any land or building or construction of any building) on scientific research undertaken under a program approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, he shall, subject to the provisions of this sub-section, be allowed a deduction of a sum equal to one and one-fourth times the amount of the expenditure certified by the prescribed authority to have been so incurred during the previous year.

(b) Where a deduction has been allowed under clause (a) for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause (i) of sub-section (1) or clause (ia) of sub-section (2) for the same or any other previous year.

(c) Where a deduction is allowed for any previous year under this sub-section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under clause (ii) of sub-section (1)] of section 32 for the same or any subsequent previous year.

(d) Any deduction made under this sub-section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the program, a certificate of its completion obtained from that authority, and the provisions of sub-section (5B) of section 155 shall apply accordingly.]

(3) If any question arises under this section as to whether, and if so, to what extent, any activity constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer the question to—

(a)  The Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;

(b)  The prescribed authority, when such question relates to any activity other than the activity specified in clause (a), whose decision shall be final.

(4) The provisions of sub-section (2) of section 32 shall apply in relation to deductions allowable under clause (IV) of sub-section (1) as they apply in relation to deductions allowable in respect of depreciation.

(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company (being an Indian company) any asset representing expenditure of a capital nature on scientific research,—

 (i)  The amalgamating company shall not be allowed the deduction under clause (ii) or clause (iii) of sub-section (2); and

(ii)  The provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset.

In exercise of the powers conferred by sub-section (1) read with clause (b) of the Explanation to section 35AC of the Income-tax Act, 1961 (43 of 1961), the Central Government, on the recommendations of the National Committee for Promotion of Social and Economic Welfare, hereby notifies the institutions approved by the said National Committee, mentioned in column (2) of the Table below, and approves the eligible projects or schemes specified to be carried on by the said institutions and the estimated cost thereof as mentioned in column (3) of the said Table, and also specifies in the column (4) of the Table the maximum amount of such cost which may be allowed as deduction under the said section 35AC for the period of approval, namely:—

Name of the Institution

II. This notification shall remain in force for a period of three years in relation to financial years 2011-12, 2012-13 & 2013-14 in respect of projects or schemes mentioned at serial numbers 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 & 25 of the said Table.

                                                             
Reference: Section 35AC of the income Tax Act, 1961

Expenditure on eligible projects or schemes

(1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee
for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year :

Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme.

(2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate—

(a)  where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution;

(b)  in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288,

in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed.

Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,—

(a)  the approval granted to such association or institution has been withdrawn; or

(b)  the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.]

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.

(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently—

 (i)  that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or

(ii)  such association or institution, to which approval has been granted, has not furnished to the National Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed,

the National Committee may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval:

Provided that a copy of the order withdrawing the approval shall be forwarded by the National Committee to the Assessing Officer having jurisdiction over the concerned association or institution.

(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation, and subsequently—

 (i)  the National Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or

(ii)  a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed,

such notification may be withdrawn in the same manner in which it was issued:

Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or local authority, as the case may be:

Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme.]

(6) Notwithstanding anything contained in any other provision of this Act, where—

 (i)  the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or

(ii)  a company has claimed deduction under the proviso to sub-section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub-section (5),

the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.]

Explanation.—For the purposes of this section,—

(a)  “National Committee” means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act;

WHEREAS by Notification of the Government of India in the Ministry of Finance (Department of Revenue) number S.O. 606(E), dated the 7th June, 2002, issued under clause ( b ) of the Explanation to section 35AC of the Income-tax Act, 1961 (43 of 1961), the Central Government had notified at serial number 1, “Running of Omayal Achi Community Health Centre at Arakambakkam” by Mr. Omayal Achi Mr. Arunachalam Trust, Coral Manor, ‘A’ Ground Floor, 40-41, Second Main Road, Raja Annamalaipuram, Chennai – 600028, as an eligible project or scheme for a period of three years beginning with assessment year 2002-03, which was extended further vide Notification number S.O.512(E), dated the 9th April, 2004 for a period of three years beginning with financial year 2003-04; which was extended further vide Notification number S.O. 999(E), dated the 5th July, 2006 for a period of three years beginning with financial year 2006-07 and which was extended further vide Notification number S.O. 835(E), dated the 25th March, 2009 for a period of three years beginning with financial year 2009-10;

AND WHEREAS by Notification number S.O. 999(E), dated the 5th July, 2006 the estimated cost was enhanced from Rs. 52.00 lakh including a corpus fund of Rs. 40.00 lakh to Rs.75.00 lakh including a corpus fund of Rs. 63.00 lakh;

AND WHEREAS the National Committee for Promotion of Social and Economic Welfare, being satisfied that the said project or scheme is being executed properly, made a further recommendation under sub-rule (5) of rule 11M of the Income-tax Rules, 1962 for enhancing the project cost from Rs. 75.00 lakh including a corpus fund of Rs. 63.00 lakh to Rs. 125 lakh including a corpus fund of Rs. 63.00 lakh;

NOW, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) read with clause ( b ) of the Explanation to section 35AC of the Income-tax Act, 1961 (43 of 1961), hereby notifies the scheme or project “Running of Omayal Achi Community Health Centre at Arakambakkam” which is being carried out by Mr. Omayal Achi Mr. Arunachalam Trust, Coral Manor, ‘A’ Ground Floor, 40-41, Second Main Road, Raja Annamalaipuram, Chennai – 600028,

 ( b )  further amends the said Notification number S.O. 606(E), dated the 7th June, 2002, to the following effect, namely :—

In the said Notification, in the Table against serial number 1, in column (4) maximum amount of cost to be allowed as deduction under section 35AC of Income-tax Act, 1961, for the letters, figures and word “Rs. 75,00 lakh including a corpus fund of Rs. 63.00 lakh”, the letters, figures and word “Rs. 125 lakh including a corpus fund of Rs. 63.00 lakh” shall be substituted.

 

Reference: Section 35AC of the income Tax Act, 1961

Expenditure on eligible projects or schemes

(1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee
for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year :

Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme.

(2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate—

(a)  where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution;

(b)  in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288,

in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed.

Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,—

(a)  the approval granted to such association or institution has been withdrawn; or

(b)  the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.]

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.

(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently—

 (i)  that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or

(ii)  such association or institution, to which approval has been granted, has not furnished to the National Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed,

the National Committee may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval:

Provided that a copy of the order withdrawing the approval shall be forwarded by the National Committee to the Assessing Officer having jurisdiction over the concerned association or institution.

(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation, and subsequently—

 (i)  the National Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or

(ii)  a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed,

such notification may be withdrawn in the same manner in which it was issued:

Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or local authority, as the case may be:

Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme.]

(6) Notwithstanding anything contained in any other provision of this Act, where—

 (i)  the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or

(ii)  a company has claimed deduction under the proviso to sub-section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub-section (5),

the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.]

Explanation.—For the purposes of this section,—

(a)  “National Committee” means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act;

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 rules further to amend the Income-tax Rules, 1962, namely :—

1. (1) These rules may be called the Income-tax (3rd Amendment) Rules, 2011.

(2) They shall come into force on the 1st day of April, 2011.

2. In the Income-tax Rules, 1962,—

    (A)    in rule 12,—

    (i)    in sub-rule (1),—

    (a)    the words, brackets, figures and letters “or the return of fringe benefits required to be furnished under sub-section (1) or sub-section (2) of section 115WD” shall be omitted;

    (b)    for the figures “2010”, the figures “2011” shall be substituted;

    (c)    in clause (a), for the word and figures “SARAL-II”, the word “SAHAJ” shall be substituted;

    (d)    after sub-clause (c), the following clause shall be inserted, namely:—

    “(ca)    in the case of a person being an individual or a Hindu undivided family deriving business income and such income is computed in accordance with special provisions referred to in section 44AD and section 44AE of the Act for computation of business income, be in Form SUGAM (ITR-4S) and be verified in the manner indicated therein.”;

    (e)    in clause (d), after the words, brackets and letter “or clause (c)”, the words, brackets and letters “or clause (ca)”, shall be inserted;

    (f)    clause (h) shall be omitted;

    (ii)    for sub-rule (2), the following sub-rule shall be substituted, namely:—

“(2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form SUGAM (ITR-4S) or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act.”;

    (iii)    in sub-rule (3), the words “or the return of fringe benefits” shall be omitted;

    (iv)    in sub-rule (5),

    (a)    the words “or the return of fringe benefits” shall be omitted;

    (b)    for the figures “2009”, the figures “2010” shall be substituted;

    (B)    in Appendix-II, for Forms SARAL-II (ITR-1), ITR-2, ITR-3, ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V, the Forms SAHAJ (ITR-1), ITR-2, ITR-3, SUGAM (ITR-4S), ITR-4, ITR-5, ITR-6, ITR-7 and ITR-V shall be substituted.

 

Reference: Rule 12 of the income Tax Rules, 1962

PART III

ASSESSMENT PROCEDURE

Return of income and return of fringe benefits.

1. The return of income required to be furnished under sub-section (1) or sub-section (3) or sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139 or clause (i) of sub-section (1) of section 142 or sub-section (1) of section 148 or section 153A  relating to the assessment year commencing on the 1st day of April, 2012 shall,—
   
2. (a) in the case of a person being an individual where the total income includes income chargeable to income-tax, under the head,—
   

    (i)  “Salaries” or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57; or
   

   (ii)  “Income from house property”, where assessee does not own more than one house property and does not have any brought forward loss under the head; or
   

   (iii) “Income from other sources“, except winnings from lottery or income from race horses, be in Form SAHAJ (ITR-1) and be verified in the manner indicated therein:
   

Provided that the provisions of this clause shall not apply to a person who is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has

 (i)  assets (including financial interest in any entity) located outside India; or

 (ii)  signing authority in any account located outside India.

(b)  in the case of a person being an individual not being an individual to whom clause (a) applies or a Hindu undivided family where the total income does not include any income chargeable to income-tax under the head “Profits or gains of business or profession”, be in Form No. ITR-2 and be verified in the manner indicated therein;

(c)  in the case of a person being an individual or a Hindu undivided family who is a partner in a firm and where income chargeable to income-tax under the head “Profits or gains of business or profession” does not include any income except the income by way of any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by him from such firm, be in Form No. ITR-3 and be verified in the manner indicated therein;

(ca) in the case of a person being an individual or a Hindu undivided family deriving business income and such income is computed in accordance with special provisions referred to in section 44AD and section 44AE of the Act for computation of business income, be in Form SUGAM (ITR-4S) and be verified in the manner indicated therein:

Provided that the provisions of this clause shall not apply to a person who is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has

 (i)  assets (including financial interest in any entity) located outside India; or

 (ii)  signing authority in any account located outside India.

(d)  in the case of a person being an individual or a Hindu undivided family other than the individual or Hindu undivided family referred to in clause (a) or clause (b) or clause (c) or clause (ca) and deriving income from a proprietary business or profession, be in Form No. ITR-4 and be verified in the manner indicated therein;

(e)  in the case of a person not being an individual or a Hindu undivided family or a company or a person to which clause (g) applies, be in Form No. ITR-5 and be verified in the manner indicated therein;

(f)  in the case of a company not being a company to which clause (g) applies, be in Form No. ITR-6 and be verified in the manner indicated therein;

(g)  in the case of a person including a company whether or not registered under section 25 of the Companies Act, 1956 (1 of 1956), required to file a return under sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section (4D) of section 139, be in Form No. ITR-7 and be verified in the manner indicated therein;

(2) The return of income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2 or Form No. ITR-3 or Form SUGAM (ITR-4S) or Form No. ITR-4 or Form No. ITR-5 or Form No. ITR-6 shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act.

(3) The return of income referred to in sub-rule (1) may be furnished in any of the following manners, namely:—

 (i)  furnishing the return in a paper form;

(ii)  furnishing the return electronically under digital signature;

(iii) transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V;

(iv) furnishing a bar-coded return in a paper form:

Provided that—

(a) an individual or a Hindu undivided family, if his or its total income, or the total income in respect of which he is or it is assessable under the Act during the previous year, exceeds ten lakh rupees, shall furnish the return for the assessment year 2012-13 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);

(aa)  an individual or a Hindu undivided family, being a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 having assets (including financial interest in any entity) located outside India or signing authority in any account located outside India and required to furnish the return in Form ITR-2 or ITR-3 or ITR-4, as the case may be, shall furnish the return for assessment year 2012-13 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);

(aaa) a firm required to furnish the return in Form ITR-5 or an individual or Hindu Undivided Family (HUF) required to furnish the return in Form ITR-4 and to whom provisions of section 44AB are applicable, shall furnish the return for assessment year 2011-12 and subsequent assessment years in the manner specified in clause (ii);

(ab) a company required to furnish the return in Form ITR-6 shall furnish the return for assessment year 2010-11 and subsequent assessment years in the manner specified in clause (ii);

(b)  a person required to furnish the return in Form ITR-7 shall furnish the return in the manner specified in clause (i).

(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns in the manners specified in clauses (ii), (iii) and (iv) of sub-rule (3).

(5) Where a return of income relates to the assessment year commencing on the 1st day of April, 2011 or any earlier assessment year, it shall be furnished in the appropriate form as applicable in that assessment year.

1. It is hereby notified for general information that the organization Physical Research Laboratory, Ahmedabad, has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with rules 5C and 5D of the Income-tax Rules, 1962 (said Rules) with effect from 1-4-2003 to 31-3-2008 in the category of ‘scientific research association’ subject to the following conditions, namely:–

  (i)  The sole objective of the approved ‘scientific research association’ shall be to undertake scientific research;

 (ii)  The approved organization shall carry out the scientific research activity by itself;

(iii)  The approved organization 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 of the said Act 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 of the said Act;

(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2. The Central Government shall withdraw the approval if the approved organization:–

 (a)  fails to maintain books of account referred to in sub-paragraph (iii) of paragraph 1; or

 (b)  fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or

 (c)  fails to furnish its statement of donations received and amounts applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or

 (d)  ceases to carry on its research activities or its research activities are not found to be genuine; or

 (e)  ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5D of the said Rules.

Reference: Section 35 of the income Tax Act, 1961

Expenditure on scientific research

(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 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 three-fourth times of any sum paid to a 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 :

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;

(iia)  an amount equal to one and one-fourth times of 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;

(iii) an amount equal to one and one-fourth times of 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 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.

Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) 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 clause (ii) or clause (iii) 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.

(2) For the purposes of clause (iv) of sub-section (1),—

(i)  in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding previous years ;

(ia)  in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year
shall be deducted for that previous year :

Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984.

[Explanation 1].—Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced.

[Explanation 2.—For the purposes of this clause,—

 (a)  “land” includes any interest in land ; and

 (b)  the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), the date on which he has so taken or retained possession of such land or part ;

(ii)  notwithstanding anything contained in clause (i), where an asset representing expenditure of a capital nature incurred before the 1st day of April, 1967, ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause (i) falls short of the said expenditure, then—

 (a)  there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and

 (b)  no deduction shall be allowed under that clause for that previous year or for any subsequent previous year ;

(iii)  if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation ; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place ;

(iv)  where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clause (ii) of sub-section (1)] of section 32 for the same or any other previous year in respect of that asset ;

(v)  where the asset mentioned in clause (ii) is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under clause (ii) of sub-section (1)] of section 32.

(2A) Where, before the 1st day of March, 1984,] the assessee pays any sum (being any sum paid with a specific direction that the sum shall not be used for the acquisition of any land or building or construction of any building) to a scientific research association or university or college or other institution referred to in clause (ii) of sub-section (1) or to a public sector company to be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, then,—

(a)  there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid ; and

(b)  no deduction in respect of such sum shall be allowed under clause (ii) of sub-section (1) for the same or any other assessment year.

[Explanation.—For the purposes of this sub-section, “public sector company” shall have the same meaning as in clause (b) of the Explanation below sub-section (2B) of section 32A.

(2AA)
Where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person] with a specific direction that the said sum shall be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority, then—

(a)  there shall be allowed a deduction of a sum equal to two times the sum so paid ; and

(b)  no deduction in respect of such sum shall be allowed under any other provision of this Act :

Provided that the prescribed authority shall, before granting approval, satisfy itself about the feasibility of carrying out the scientific research and shall submit its report to the Director General in such form as may be prescribed.

Explanation 1.—The deduction, to which the assessee is entitled in respect of any sum paid to a National Laboratory, University, Indian Institute of Technology or a specified person for the approved programme referred to in this sub-section, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to,—

(a)  such Laboratory, or specified person has been withdrawn; or

(b)  the programme, undertaken by the National Laboratory, University, Indian Institute of Technology or specified person, has been withdrawn.

Explanation [2].—For the purposes of this section,—

(a)  “National Laboratory” means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio-Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed ;

(b)  “University” shall have the same meaning as in Explanation to clause (ix) of section 47 ;

(c)  “Indian Institute of Technology” shall have the same meaning as that of “Institute” in clause (g) of section 3of the Institutes of Technology Act, 1961 (59 of 1961)];

(d)  “specified person” means such person as is approved by the prescribed authority.]

(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred.

Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).]

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed.

(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2012

(6) No deduction shall be allowed to a company approved under sub-clause (C) of clause (iia) of sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2008.

(2B)(a) Where, before the 1st day of March, 1984,] an assessee has incurred any expenditure (not being in the nature of capital expenditure incurred on the acquisition of any land or building or construction of any building) on scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, he shall, subject to the provisions of this sub-section, be allowed a deduction of a sum equal to one and one-fourth times the amount of the expenditure certified by the prescribed authority to have been so incurred during the previous year.

(b) Where a deduction has been allowed under clause (a) for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause (i) of sub-section (1) or clause (ia) of sub-section (2) for the same or any other previous year.

(c) Where a deduction is allowed for any previous year under this sub-section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under clause (ii) of sub-section (1)] of section 32 for the same or any subsequent previous year.

(d) Any deduction made under this sub-section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the programme, a certificate of its completion obtained from that authority, and the provisions of sub-section (5B) of section 155 shall apply accordingly.]

(3) If any question arises under this section as to whether, and if so, to what extent, any activity constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer the question to—

(a)  the Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;

(b)  the prescribed authority, when such question relates to any activity other than the activity specified in clause (a), whose decision shall be final.

(4) The provisions of sub-section (2) of section 32 shall apply in relation to deductions allowable under clause (iv) of sub-section (1) as they apply in relation to deductions allowable in respect of depreciation.

(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company (being an Indian company) any asset representing expenditure of a capital nature on scientific research,—

 (i)  the amalgamating company shall not be allowed the deduction under clause (ii) or clause (iii) of sub-section (2); and

(ii)  the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset.

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 rules further to amend the Income ‐ tax Rules, 1962, namely: ‐

1. (1) These rules may be called the Income ‐ tax (Second Amendment) Rules, 2011.

(2) They shall come into force on the 1st day of April, 2011.

2. In the Income-tax Rules, 1962, –

 (a)  For rule 28AA, the following rule shall be substituted, namely:-

“28AA. Certificate for deduction at lower rates or no deduction of tax from income other than dividends.—(1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:-

  (i)  tax payable on estimated income of the previous year relevant to the assessment year;

 (ii)  tax payable on the assessed or returned income, as the case may be, of the last three previous years;

(iii)  existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957;        

(iv)  advance tax payment for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28;

 (v)  tax deducted at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28; and

(vi)  tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28.

(3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.

(4) The certificate shall be valid only with regard to the person responsible for deducting the tax and named therein.

(5) The certificate shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate.”

 (b)  in rule 31A, in sub-rule (4), after clause (iv), the following clauses shall be inserted, namely:-

“(v) furnish particulars of amount paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax under section 197 by the Assessing Officer of the payee;

(vi) furnish particulars of amount paid or credited on which tax was not deducted in view of the compliance of provisions of sub-section (6) of section 194C by the payee.”

  (c)  in Appendix-II, for Form No.13, the following Form shall be substituted, namely:-

“FORM NO. 13

[See rules 28 and 37G]

Application by a person for a certificate under sections 197 and/or 206C (9) of the Income-tax Act, 1961, for no *deduction/collection of tax or *deduction/

collection of tax at a lower rate

To

The Assessing Officer,

____________________

____________________

____________________

 
 

1. *I,_________________________________________________of___________________do, hereby, request that a certificate may be issued to the person responsible for paying to me the incomes/sum by way of salary/interest on securities/interest other than “interest on securities”/insurance commission/commission (not being insurance commission) or brokerage/commission, etc., on the sale of lottery tickets/fees for professional or technical services/any sum by way of payment to contractors and sub-contractors/dividends/rent/income in respect of units/sum by way of payment of compensation on acquisition of immovable property (strike out whichever is not applicable) authorizing him not to deduct income-tax/to deduct income-tax at the rate of____________per cent at the time of payment to me of such income/sum. The particulars of my income and other details are as per para 2.

and/or

*I,____________________________________________of__________________________________do, hereby, request that a certificate may be issued to the seller, being the person responsible for collecting the tax from me in respect of the amount payable by me as the buyer of _____________________ [specify the nature of goods referred to in the Table in sub-section (1) of section 206C]/lessee or licensee of _______________________________________________________ [specify the nature of contract or licence or lease referred to in the Table in sub-section (1C) of section 206C] (Strike out whichever is not applicable) authorizing him to collect income-tax at the rate of _____________________________ per cent at the time of debit of such amount to my account or receipt thereof from me, as the case may be. The particulars of my income and other details are as per para 2.

2. The particulars of my income and other details are as under:

  (i)   Status

        (State whether individual, Hindu undivided family, firm, body of individuals, Company, etc.)

 (ii)  Residential status

        (Whether resident / resident but not ordinarily resident/non-resident)

(iii)   Permanent Account No. (PAN)

 (iv)  Tax Deduction and Collection Account No. (TAN)

  (v)  Details of returns/statements which have become due but have not been filed:

 (vi)   Details of returned income/ assessed income for the last three assessment years:

        (enclose copies of returns of income filed alongwith their enclosures and copies of assessment orders, if assessed, for the last three assessment years.)

(vii)   Details of tax payment for the last three assessment years:

  
 

(viii)Details of sales, profit, etc. for the last three previous years in the case of assessee whose income include income under the head “Profits and gains of business or profession”: (enclose copies of profit and loss account and balance sheet along with audit report, if audited, for the last three previous years)

 (ix)   Details of existing liability under Income-tax Act, 1961 and Wealth-tax Act, 1957:

  (x)   Assessment year to which the payments relate

 (xi)   Estimated total income of the previous year relevant to the assessment year referred to in (x) above (give detailed computation and basis thereof)

(xii)  Total tax including interest payable on the income at (xi)

(xiii) How the liability mentioned in col. (ix) and col. (xii) is proposed to be discharged?

(xiv)  Details of payment of advance-tax and tax already deducted/collected for the assessment year relevant to the current previous year till date.

(xv)  Details of income claimed to be exempt and not included in the total income in col. (xi) (Please append a note giving reason for claiming such exemption).

(xvi)  Please furnish the particulars in Annexure-I in respect of no deduction of tax or deduction of tax at a lower rate under section 197 and/or in Annexure-II for collection of tax at lower rate under section 206C(9) of the Income-tax Act, as the case may be.

*I,________________________________________________ the trustee/co-trustee of____________________________________do hereby declare that the securities/sums/shares, particulars of which are given in the Annexure, are properly held under trust wholly for charitable or religious purposes and that the income therefrom qualifies for exemption under sections 11 and 13 of the Income-tax Act, 1961.

*I declare that the securities/sums/shares, particulars of which are given in the Schedules above, stand in my name and are beneficially owned by me, and the income therefrom is not includible in the total income of any other person under sections 60 to 64 of the Income-tax Act, 1961.

I further declare that what is stated in this application is correct.

*Strike out whichever is not applicable.

 
 

ANNEXURE I

[For the purpose of tax deduction at source]

Please furnish the particulars with the Schedules below in respect of the payments for which the certificate is sought.

SCHEDULE I

  
 

 
 

SCHEDULE II

  
 

 
 

SCHEDULE III

  
 

 
 

SCHEDULE IV

  
 

 
 

SCHEDULE V

  
 

 
 

SCHEDULE VI

  
 

 
 

SCHEDULE VII

 
 

  
 

 
 

SCHEDULE VIII

  
 

 
 

SCHEDULE IX

  
 

 
 

SCHEDULE X

  
 

 
 

SCHEDULE XI

  
 

 
 

SCHEDULE XII

  
 

  
 

 
 

ANNEXURE II

[For the purpose of tax collection at source]

Please furnish particulars of the amounts payable in respect of which the certificate is sought in the schedules below:-

SCHEDULE I

  
 

 
 

SCHEDULE II

  
 

 
 

  
 

 

Reference: Rule 28AA of the income Tax Rules, 1962

Certificate for deduction at lower rates or no deduction of tax from income other than dividends

(1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following:—

 (i)  tax payable on estimated income of the previous year relevant to the assessment year;

(ii)  tax payable on the assessed or returned income, as the case may be, of the last three previous years;

(iii)  existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957;

(iv)  advance tax payment for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28;

(v)  tax deducted at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28; and

(vi)  tax collected at source for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28.

(3) The certificate shall be valid for such period of the previous year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.

(4) The certificate shall be valid only with regard to the person responsible for deducting the tax and named therein.

(5) The certificate shall be issued direct to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate.

The President of India is pleased to approve the creation of the Directorate of Income-tax (Expenditure Budget), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, with immediate effect.

2. The Directorate of Income-tax (Expenditure Budget) will act as the Nodal Authority in respect of all Budget matters for the Grant No. 42 Direct Taxes and will perform all work related to the management of Expenditure Budget under this grant which inter alia, include:

    (i)    to issue the Budget Circular as prescribed by Budget Division, Department of Economic Affairs;

    (ii)    to examine the budget proposals received from the various constituent formations/units/under the grant.

    (iii)    to consolidate the budget proposals received from the various constituents formations/units at each stage of the Budget exercise i.e. Budget Estimate (BE), Revised Estimate (RE) and Final Requirement (FR) and submit the same to FA (Finance) for further action;

    (iv)    to allocate object head wise approved provisions to respective Budget controlling authorities;

    (v)    to prepare the Statement of Budget Estimates (SBEs) for inclusion in the relevant Budget documents;

    (vi)    to monitor the progress in Expenditure vis-a-vis Sanctioned Grant and submit the Monthly and Quarterly Expenditure Review to FA (Finance) for further action;

    (vii)    to propose the Re-appropriation orders, surrender of savings etc. to FA (Finance) for concurrence/approval of the competent authority;

    (viii)    to finalise the appropriation Accounts in consultation with Principal CCA, CBDT and submit to FA (Finance) for concurrence;

    (ix)    to take necessary action in respect of the examination by the Standing Committee on Finance on Detailed Demands for Grants;

    (x)    to take action in respect of Audit references in Expenditure matters, for example, Action Taken Notes on Audit Paras/PAC para etc.;

    (xi)    Any other matter, related to the above.

3. The Directorate of Income-tax (Expenditure Budget) will be headed by a Director of Income-tax (Expenditure Budget), who will be an officer of the level of Commissioner of Income-tax and will be located in New Delhi. The Directorate will function under the administrative control of the Director General of Income-tax (Logistics), New Delhi and will be an attached office of CBDT.

4. The Directorate of Income-tax (Expenditure Budget) shall have two divisions. These divisions would be headed by the officers of the rank of Additional Commissioners of Income-tax who would perform the functions assigned to them by CBDT. The Central Board of Direct Taxes can amend the functions assigned to the divisions.

5. Each Division shall comprise of two ITOs and an appropriate staff complement.

6. The staff requirement of the Directorate of Income-tax (Expenditure Budget) will be notified separately.

7. For the present the staff requirement will be met from within the overall strength of Income-tax Department.

1. It is hereby notified for general information that the organization Karnataka State Sericulture Research and
Development Institute, Bangalore has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), with effect from 1-4-2003 onwards in the category of ‘Institution’, partly engaged in research activities subject to the following conditions, namely:-

    (i)    The sums paid to the approved organization shall be utilized for scientific research;

    (ii)    The approved organization shall carry out scientific research through its faculty members or its enrolled students;

    (iii)    The approved organization shall maintain separate books of account
in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the Explanation to sub-section (2) of section 288 of the said Act 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 of the said Act;

    (iv)    The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.

2. The Central Government shall withdraw the approval if the approved organization:—

    a.    fails to maintain separate books of account referred to in sub-paragraph (iii) of paragraph 1; or

    b.    fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or

    c.    fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or

    d.    ceases to carry on its research activities or its research activities are not found to be genuine; or

    e.    ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.

Reference: Section 35 of the income Tax Act, 1961

(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 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 three-fourth times of any sum paid to a 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 :

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;

(iia)  an amount equal to one and one-fourth times of 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;

(iii) an amount equal to one and one-fourth times of 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 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.

Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a research association, university, college or other institution to which clause (ii) or clause (iii) 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 clause (ii) or clause (iii) 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.

(2) For the purposes of clause (iv) of sub-section (1),—

(i)  in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding previous years ;

(ia)  in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year
shall be deducted for that previous year :

Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984.

Explanation 1.—Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced.

Explanation 2.—For the purposes of this clause,—

 (a)  “land” includes any interest in land ; and

 (b)  the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), the date on which he has so taken or retained possession of such land or part ;

(ii)  notwithstanding anything contained in clause (i), where an asset representing expenditure of a capital nature incurred before the 1st day of April, 1967, ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause (i) falls short of the said expenditure, then—

 (a)  there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and

 (b)  no deduction shall be allowed under that clause for that previous year or for any subsequent previous year ;

(iii)  if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation ; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place ;

(iv)  where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clause (ii) of sub-section (1)] of section 32 for the same or any other previous year in respect of that asset ;

(v)  where the asset mentioned in clause (ii) is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under clause (ii) of sub-section (1)] of section 32.

(2A) Where, before the 1st day of March, 1984,] the assessee pays any sum (being any sum paid with a specific direction that the sum shall not be used for the acquisition of any land or building or construction of any building) to a scientific research association or university or college or other institution referred to in clause (ii) of sub-section (1) or to a public sector company to be used for scientific research undertaken under a program approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, then,—

(a)  there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid ; and

(b)  no deduction in respect of such sum shall be allowed under clause (ii) of sub-section (1) for the same or any other assessment year.

Explanation.—For the purposes of this sub-section, “public sector company” shall have the same meaning as in clause (b) of the Explanation below sub-section (2B) of section 32A.

(2AA)
Where the assessee pays any sum to a National Laboratory or a University or an Indian Institute of Technology or a specified person] with a specific direction that the said sum shall be used for scientific research undertaken under a program approved in this behalf by the prescribed authority, then—

(a)  There shall be allowed a deduction of a sum equal to two times the sum so paid; and

(b)  No deduction in respect of such sum shall be allowed under any other provision of this Act:

Provided that the prescribed authority shall, before granting approval, satisfy itself about the feasibility of carrying out the scientific research and shall submit its report to the Director General in such form as may be prescribed.

Explanation 1.—The deduction, to which the assessee is entitled in respect of any sum paid to a National Laboratory, University, Indian Institute of Technology or a specified person for the approved program referred to in this sub-section, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to,—

(a)  Such Laboratory, or specified person has been withdrawn; or

(b)  The programe, undertaken by the National Laboratory, University, Indian Institute of Technology or specified person, has been withdrawn.

Explanation
2.—for the purposes of this section,—

(a)  “National Laboratory” means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organization, the Department of Electronics, the Department of Bio-Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed ;

(b)  “University” shall have the same meaning as in Explanation to clause (ix) of section 47;

(c)  “Indian Institute of Technology” shall have the same meaning as that of “Institute” in clause (g) of section 3of the Institutes of Technology Act, 1961

(D)”specified person” means such person as is approved by the prescribed authority.

(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure so incurred.

Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970

(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director General in such form and within such time as may be prescribed.

(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2012

(6) No deduction shall be allowed to a company approved under sub-clause (C) of clause (iia) of sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2008.

(2B)(a) Where, before the 1st day of March, 1984,] an assessee has incurred any expenditure (not being in the nature of capital expenditure incurred on the acquisition of any land or building or construction of any building) on scientific research undertaken under a programe approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, he shall, subject to the provisions of this sub-section, be allowed a deduction of a sum equal to one and one-fourth times the amount of the expenditure certified by the prescribed authority to have been so incurred during the previous year.

(b) Where a deduction has been allowed under clause (a) for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause (i) of sub-section (1) or clause (IA) of sub-section (2) for the same or any other previous year.

(c) Where a deduction is allowed for any previous year under this sub-section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under clause (ii) of sub-section (1)] of section 32 for the same or any subsequent previous year.

(d) Any deduction made under this sub-section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the programe, a certificate of its completion obtained from that authority, and the provisions of sub-section (5B) of section 155 shall apply accordingly.]

(3) If any question arises under this section as to whether, and if so, to what extent, any activity constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer the question to—

(a)  the Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;

(b)  the prescribed authority, when such question relates to any activity other than the activity specified in clause (a), whose decision shall be final.

(4) The provisions of sub-section (2) of section 32 shall apply in relation to deductions allowable under clause (iv) of sub-section (1) as they apply in relation to deductions allowable in respect of depreciation.

(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company (being an Indian company) any asset representing expenditure of a capital nature on scientific research,—

 (i)  the amalgamating company shall not be allowed the deduction under clause (ii) or clause (iii) of sub-section (2); and

(ii)  the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset.

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 rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (First Amendment) Rules, 2011.

(2) They shall come into force on the 1st day of April, 2011.

2. In rule 6DDA of the Income-tax Rules, 1962,–

    (a)    For clause (iv), the following clause shall be substituted, namely: –

“(iv)
the stock exchange shall ensure that transactions (in respect of cash and derivative market) once registered in the system are not erased”;

    (b)    after clause (iv), the following clause shall be inserted, namely: –

“(v) the stock exchange shall ensure that the transactions (in respect of cash and derivative market) once registered in the system are modified only in cases of genuine error and maintain data regarding all transactions (in respect of cash and derivative market) registered in the system which have been modified and submit a monthly statement in Form No. 3BB to the Director General of Income-tax (Intelligence), New Delhi within fifteen days from the last day of each month to which such statement relates.”

3. In rule 6DDB of the Income-tax Rules, 1962, in clause (iii) of sub-rule (2), for the word, brackets and letters “clause (iv)”, the word, brackets and letter “clause (v)” shall be substituted.

4. In Appendix-II of the Income-tax Rules, 1962, after Form No.3BA, the following Form shall be inserted, namely:-

FORM NO. 3BB

[See rule 6DDA]

Monthly statement to be furnished by a stock exchange in respect of transactions in which client codes been modified after registering in the system for the month of…………………

    1.    Name and address of the Stock Exchange: ……………………………….

    2.    Permanent Account Number: ……………………………….

    3.    Details of transaction in which client codes have been modified after registering in system are enclosed in soft copy as annexure.

Verification

 
 

ANNEXURE TO FORM NO. 3BB

(Soft Copy)

Derivative Market

 
 

Cash Market

 

Reference: rule 6DDA of the income tax rules, 1962

Conditions that a stock exchange is required to fulfill to be notified as a recognised stock exchange for the purposes of clause (d) of proviso to clause (5) of section 43

For the purposes of clause (d) of proviso to clause (5) of section 43, a stock exchange shall fulfill the following conditions in respect of trading in derivatives, namely :—

 (i)  the stock exchange shall have the approval of the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 (15 of 1992) in respect of trading in derivatives and shall function in accordance with the guidelines or conditions laid down by the Securities and Exchange Board of India;

 (ii)  the stock exchange shall ensure that the particulars of the client (including unique client identity number and PAN) are duly recorded and stored in its databases;

(iii)  the stock exchange shall maintain a complete audit trail of all transactions (in respect of cash and derivative market) for a period of seven years on its system;

(iv) the stock exchange shall ensure that transactions (in respect of cash and derivative market) once registered in the system are not erased;

(v)
the stock exchange shall ensure that the transactions (in respect of cash and derivative market) once registered in the system are modified only in cases of genuine error and maintain data regarding all transactions (in respect of cash and derivative market) registered in the system which have been modified and submit a monthly statement in Form No. 3BB to the Director General of Income-tax (Intelligence), New Delhi within fifteen days from the last day of each month to which such statement relates.

In the notification of the Government of India in the Ministry of Finance, Department of Revenue, (Central Board of Direct Taxes) number 80/2010, dated the 19th October, 2010, to be published in the Gazette of India, Extraordinary, Part-II, section 3, sub-section (ii), in paragraph 1 for “annuity plan of the ICICI Prudential Life Insurance Company Limited”, read “annuity plan of the TATA AIG Life Insurance Company.”

Reference: Section 80C of the income Tax Act, 1961

Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc

(1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees.

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee—

 (i)  to effect or to keep in force an insurance on the life of persons specified in sub-section (4);

(ii)  to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (xii), on the life of persons specified in sub-section (4):

Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;

(iii) by way of deduction from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum so deducted does not exceed one-fifth of the salary;

(iv) as a contribution by an individual to any provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies;

(v) as a contribution to any provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of any person specified in sub-section (4);

(vi) as a contribution by an employee to a recognised provident fund;

(vii)  as a contribution by an employee to an approved superannuation fund;

(viii) as subscription to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf;

(ix) as subscription to any such savings certificate as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(x) as a contribution, in the name of any person specified in sub-section (4), for participation in the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked Insurance Plan) specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(xi) as a contribution in the name of any person specified in sub-section (4) for participation in any such unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xii) to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify;

(xiii)  as subscription to any units of any Mutual Fund [referred to in] clause (23D) of section 10 or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xiv) as a contribution by an individual to any pension fund set up by any Mutual Fund referred to in clause (23D) of section 10 or by the Administrator or the specified company, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xv) as subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xvi) as subscription to any such deposit scheme of—

 (a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or

(b)  any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both,

as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xvii) as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—

(a)  to any university, college, school or other educational institution situated within India;

(b)  for the purpose of full-time education of any of the persons specified in sub-section (4);

(xviii) for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head “Income from house property” (or which would, if it had not been used for the assessee’s own residence, have been chargeable to tax under that head), where such payments are made towards or by way of—

(a)  any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

(b)  any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or

(c)  repayment of the amount borrowed by the assessee from—

(1)  the Central Government or any State Government, or

(2)  any bank, including a co-operative bank, or

(3)  the Life Insurance Corporation, or

(4)  the National Housing Bank, or

(5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or

(6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or

(7)  the assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or

(8)  the assessee’s employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or

(d)  stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,

but shall not include any payment towards or by way of—

(A)  the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

(B)  the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(C)  any expenditure in respect of which deduction is allowable under the provisions of section 24;

(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed form.

Explanation.—For the purposes of this clause,—

(i)  “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA;

(ii)  “public company” shall have the meaning assigned to it in section 393 of the Companies Act, 1956 (1 of 1956);

(iii) “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(xx) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form:

Provided that this clause shall apply if the amount of subscription to such units is subscribed only in the eligible issue of capital of any company.

Explanation.—For the purposes of this clause “eligible issue of capital” means an issue referred to in clause (i) of the Explanation to clause (xix) of sub-section (2);

(xxi) as term deposit—

(a)  for a fixed period of not less than five years with a scheduled bank; and

(b)  which is in accordance with a scheme framed and notified, by the Central Government, in the Official Gazette for the purposes of this clause.

Explanation.—For the purposes of this clause, “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);]

(xxii) as subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xxiii) in an account under the Senior Citizens Savings Scheme Rules, 2004;

(xxiv) as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.

(3) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy other than a contract for a deferred annuity as is not in excess of twenty per cent of the actual capital sum assured.

Explanation.—In calculating any such actual capital sum assured, no account shall be taken—

 (i)  of the value of any premiums agreed to be returned, or

(ii)  of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

The following sub-section (3A) shall be inserted after sub-section (3) of section 80C by the Finance Act, 2012, w.e.f. 1-4-2013 :

(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured.

Explanation.—For the purposes of this sub-section, “actual capital sum assured” in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

(i)  the value of any premium agreed to be returned; or

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

(4) The persons referred to in sub-section (2) shall be the following, namely:—

(a)  for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,—

 (i)  in the case of an individual, the individual, the wife or husband and any child of such individual, and

(ii)  in the case of a Hindu undivided family, any member thereof;

(b)  for the purposes of clause (ii) of that sub-section, in the case of an individual, the individual, the wife or husband and any child of such individual;

(c)  for the purposes of clause (xvii) of that sub-section, in the case of an individual, any two children of such individual.

(5) Where, in any previous year, an assessee—

(i)  terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a)  in case of any single premium policy, within two years after the date of commencement of insurance; or

(b)  in any other case, before premiums have been paid for two years; or

(ii)  terminates his participation in any unit-linked insurance plan referred to in clause (x) or clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

(iii) transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,

then,—

 (a)  no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and

(b)  the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

(6) If any equity shares or debentures, with reference to the cost of which a deduction is allowed under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

Explanation.—A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.

(6A) If any amount, including interest accrued thereon, is withdrawn by the assessee from his account referred to in clause (xxiii) or clause (xxiv) of sub-section (2), before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year:

Provided that the amount liable to tax shall not include the following amounts, namely:—

 (i)  any amount of interest, relating to deposits referred to in clause (xxiii) or clause (xxiv) of sub-section (2), which has been included in the total income of the assessee of the previous year or years preceding such previous year; and

(ii)  any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.]

(7) For the purposes of this section,—

(a)  the insurance, deferred annuity, provident fund and superannuation fund referred to in clauses (i) to (vii);

(b)  unit-linked insurance plan and annuity plan referred to in clauses (xii) to (xiiia);

(c)  pension fund and subscription to deposit scheme referred to in clauses (xiiic) to (xiva);

(d)  amount borrowed for purchase or construction of a residential house referred to in clause (xv),

of sub-section (2) of section 88 shall be eligible for deduction under the corresponding provisions of this section and the deduction shall be allowed in accordance with the provisions of this section.

(8) In this section,—

(i)  “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(ii)  “contribution” to any fund shall not include any sums in repayment of loan;

(iii) “insurance” shall include—

 (a)  a policy of insurance on the life of an individual or the spouse or the child of such individual or a member of a Hindu undivided family securing the payment of specified sum on the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date;

(b)  a policy of insurance effected by an individual or a member of a Hindu undivided family for the benefit of a minor with the object of enabling the minor, after he has attained majority to secure insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf;

(iv) “Life Insurance Corporation” means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956);

(v) “public company” shall have the same meaning as in section 34 of the Companies Act, 1956 (1 of 1956);

(vi) “security” means a Government security as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

(vii) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(viii) “transfer” shall be deemed to include also the transactions referred to in clause (f) of section 269UA.