Exemption under section 10(21) of the Income-tax Act, 1961 - Income Tax - 400/1984

Exemption under section 10(21) of the Income-tax Act, 1961 Circular No. 400 Dated 19/10/1984 Section 10(21) of the Income-tax Act, 1961, provides for grant of exemption to any income of a scientific research association approved for the time being for the purposes of section 35(1)(ii) of the Act which is applied solely to the purposes of that association. The question whether the income of the scientific research association has to be spent in the relevant year itself so as to qualify for the exemption came up before the Orissa High Court in the case of Dalmia Institute of Scientific and Industrial Research v. ITO [1979] 118 ITR 575. The High Court has held that there is nothing in section 10(21) which requires that to qualify for exemption the income should be spent in the relevant year itself. The interpretation of section 10(21) given by the Orissa High Court has been accepted by the Board. Section 10(21) has been amended by the Finance Act, 1983, so as to require the scientific research association- (i) to invest or desposit after February 28, 1983, any sums by way of contributions in the forms and modes specified in section 11(5); (ii) to conform to the investment pattern prescribed by section 11(5) after November 30, 1983, in respect of any funds invested or deposited before March 1, 1983, in any other manner; (iii) Not to have investments in any company other than Government company as defined in section 617 of the Companies Act, 1956, or an Corporation established by or under a Central, State or Provincial Act after November 30, 1983. In order to ensure that scientific research associations approved for the time being under section 35(1)(ii) also satisfy the requirements of section 10(21) as amended, it will be necessary that notices under section 139(2) of the Income-tax Act, 1961, are issued to the associations and the returns scrutinised for fulfilment of the conditions prescribed in section 10(21) in case returns are not filed voluntarily under section 139(1). R.K. Tewari Under Secy. Central Board of Direct Taxes.