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Income-tax (1st Amendment) Rules, 2001 - S.O. 85(E) - Income TaxExtract MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes) NOTIFICATION New Delhi, the 31 st January, 2001 Income-Tax S.O. 85(E).- In exercise of the powers conferred by section 295 , read with sub-section (8A) of section 80 IB , 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 (1 st Amendment) Rules, 2001. (2) They shall come into force on the date of their publication in the Official Gazette. 1. In the Income-tax Rules, 1962 , in Part IV, after rule 18C, the following rule shall be inserted, namely - 18D. Prescribed authority for approval of companies carrying on scientific research and development - (1) For the purposes of sub-section (8A) of section 80-1B, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India. (2) The prescribed authority shall initially grant approval to a company carrying on scientific research and development for a period of three assessment years and subject to satisfactory performance of that company on periodic review extend the said approval for a further period of three assessment years so that the total period of approval is for ten consecutive assessment years, beginning from the initial assessment year. 18DA. Prescribed conditions for deduction under sub-section (8A) of section 80-IB. (1) Any company carrying on scientific research and development shall be eligible for deduction specified in sub-section (8A) of section 80-IB, if such company (a) is registered in India; (b) has its main object the scientific and industrial research and development; (c) has adequate infrastructure such as laboratory facilities, qualified manpower, scale-up facilities and prototype development facilities for undertaking scientific research and development of its own; (d) has a well formulated research and development programme comprising of time bound research and development projects with proper mechanism for selection and review of the projects or programme; (e) is engaged exclusively in scientific research and development activities leading to technology development, improvement of technology and transfer of technology developed by themselves; (f) submits the annual return alongwith statement of accounts and annual report within eight months after the close of each accounting year to the prescribed authority. (2) Every company which is approved under sub-rule (2) of rule 18D shall (a) sell any prototype or output, if any, from its laboratories or pilot plants with the prior permission of the prescribed authority; (b) intimate the change, if any, in its memorandum of association and articles of association relating to its main objects and forward the altered copy of its memorandum of association and articles of association to the prescribed authority; (c) apply for extension of the approval at least three months before expiry of the approval already granted by the prescribed authority; (d) have a system of monitoring the cost of research and development projects. (3) If, at any stage, it is found that (a) the approval granted to the company referred to in sub-rule (2) of rule 18D is to avoid payment of taxes by its group companies or companies related to its directors or majority of its shareholders; (b) any provisions of the Act or the rules have been violated, the prescribed authority specified may withdraw the approval so granted. (4) Every company referred to in sub-rule (1) shall make an application to the prescribed authority for the purposes of obtaining approval. (5) Every application referred to in sub-rule (4) shall be accompanied by (a) memorandum of association and articles of association incorporating all amendments duly certified by the company secretary or managing director of the company; (b) annual report of the company for the last three years, if available; (c) photocopies of the memorandum of understanding relating to all on-going and future sponsored research projects or programmes. (6) The prescribed authority may call for any information or document which may be necessary for consideration of the grant of approval under sub-rule (2) of rule 18D. (7) The prescribed authority shall grant approval within four months from the date of receipt of the application : Provided that where the approval is not granted, the decision of the said authority shall be communicated to the applicant within the said period of four months : Provided further that no approval shall be refused unless the applicant has been given an opportunity of being heard. [F. No. 142/47/2000-TPL] T. K. SHAH, Director
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