29. Prescribed authority and process of approval for expenditure on scientific research under section 45(1)(a)(ii) and (2).–

(1) For the purposes of clause (b) read with clause (a)(ii) of section 45(1), the prescribed authority shall be Principal Chief Commissioner of Income tax (Exemptions) in concurrence with the Secretary, Department of Scientific and Industrial Research, Government of India.

(2) For the purposes of section 45(2),––

(a) the prescribed authority shall be Secretary, Department of Scientific and Industrial Research, Government of India;

(b) no company shall be entitled for deduction under said section, unless it enters into an agreement with the prescribed authority for co-operation in research and development facility and fulfils such conditions with regard to maintenance of books of account and audit thereof and furnishing of reports in the manner provided in this rule;

(c) the application for entering into an agreement specified in clause (b) shall be made by a company in Form No.11;

(d) the prescribed authority shall,––

(i) if he is satisfied that the conditions mentioned in section 45(2) and specified in this sub-rule are fulfilled, pass an order in writing in Form No. 14, approving the facility within four months from the end of the month in which application is received; (ii) where an application is rejected, a reasonable opportunity of being heard shall be granted to the company; and

(iii) furnish a copy of such order to the Chief Commissioner of Income-tax having jurisdiction over such company;

(e) approval of expenditure incurred on in-house research and development facility by a company shall be subject to the following conditions,:—

(i) the facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of similar nature;

(ii) the prescribed authority shall furnish electronically its report––

(A) in relation to the approval of in-house research and development facility in Part A of Form No. 12;

(B) quantifying the expenditure incurred on in-house research and development facility by the company during the tax year and eligible for deduction under section 45(2) in Part B of Form No. 12;

(iii) the report in Form No. 12 referred to in sub-clause (ii) shall be furnished electronically by the prescribed authority to the Chief Commissioner of Income-tax having jurisdiction over such company within one hundred and twenty days,—

(A) of the grant of the approval, in a case referred to in sub-clause (ii)(A);

(B) of the submission of the audit report, in a case referred to in sub-clause (ii)(B);

(iv) the company shall maintain separate books of account for each approved facility which shall be audited annually;

(v) a report of audit in Form No. 13 shall be furnished electronically to the Secretary, Department of Scientific and Industrial

Research on or before the due date specified in section 263(1)(c) for furnishing the return of income, for each succeeding tax

year;

(vi) the company shall attach copy of such audited annual account with the return of income to be filed under section 263(1)(a) for each tax year;

(vii) the company shall ensure that the capital and revenue expenditure on in-house research and development facility is reflected in the schedules or notes to accounts in the audited financial statement of the company prepared for the purposes of its annual report and for the purposes of computation of income-tax; and

(viii) the assets acquired by the approved facility shall be utilised only for the approved purpose and shall not be disposed of without the approval of the Secretary, Department of Scientific and Industrial Research.

(3) For the purposes of this rule, ?audited? means the audit of accounts by an accountant, as defined in section 515(3)(b).