Section 10(21) l Income of Approved Scientific Research Associations
Circular No. 400 was issued by the Central Board of Direct Taxes on 19 October 1984. Its subject is Section 10(21) l Income of Approved Scientific Research Associations.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Directs that notices under section 139(2) be issued to approved scientific research associations and their returns scrutinised for the section 10(21) conditions where they do not file voluntarily under section 139(1). Section 10(21) exempts the income of a scientific research association approved for the time being under section 35(1)(ii) which is applied solely to that association's purposes. The Finance Act, 1983 added conditions: sums by way of contributions received after 28 February 1983 must be invested or deposited in the forms and modes specified in section 11(5); funds invested or deposited before 1 March 1983 in any other manner must be brought into the section 11(5) pattern after 30 November 1983; and after 30 November 1983 the association must not hold investments in any company other than a Government company as defined in section 617 of the Companies Act, 1956 or a corporation established by or under a Central, State or Provincial Act. The Board also records its acceptance of the Orissa High Court's view in Dalmia Institute of Scientific and Industrial Research v. ITO [1979] 118 ITR 575 that section 10(21) does not require the income to be spent in the relevant year itself.
The Board had to ensure that associations approved under section 35(1)(ii) also met the investment conditions inserted into section 10(21) by the Finance Act, 1983 with effect from 1 April 1984.
SECTION 10(21) l INCOME OF APPROVED SCIENTIFIC RESEARCH ASSOCIATIONS
119. Requirements laid down in proviso inserted by Finance Act, 1983 with effect from 1-4-1984 to the clause - For their compliance whether it will be necessary that associations are issued notices under section 139(2) and returns are scrutinised for fulfilment of conditions in case returns are not filed voluntarily
1. Section 10(21 ) 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) which is applied solely to the purposes of that association.
2. 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.
3. Section 10(21 ) has been amended by the Finance Act, 1983 so as to require the scientific research association—
i. to invest or deposit 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 any corporation established by or under a Central, State or Provincial Act after November 30,1983.
4. 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) 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).
Circular : No. 400 [F. No. 194/10/81-IT(A-I)], dated 19-10-1984.
In the assessment of a research association where exemption is being tested against its investment pattern, or on a notice calling for a return from an association that did not file.
Source: the Income Tax Department’s own published text — its page for this instrument.