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Current Developments

Budget 2001-2002

Service Tax :

* Following included as taxable services under the finance bill 2001-2002 for which shall be levied a service tax at the rate of 5% of the value of the taxable services.

*Service rendered by a consulting engineer to a client in relation to advice , consultancy or techinical assistance in any manner in one or more disciplines of engineering ; consulting engineer means any profesionally qualified engineer or an engineering firm who ,either directly or indirectly renders any advice , consultancy or technical assistance.

* Service rendered by management consultant in connections with the mangement of any organization in any manner ; management consultants include any person who renders any advice relating to conceptualising , devising , develpoment , modification ,rectification or upgradation of any working system of any organisation

* Service rendered by a scientist or a technocract or any science or technology institution or organisation in relation to science or technical consulatancy in one or more disciplines of science and technology .

Income Tax Relating To Expenditure On Scientific Research :

*Ammendments will take effect from first April 2002

* The existing provision under which any sum paid by an assessee to an approved national labrotary or university or Indian Institute of Technology for carrying out approved program of scientific research is eligible for weighted deduction of one and one fourth times of the sum so paid extended to include such specified persons as may be approved by the prescribed authority

* Benefits of tax deduction on expenditure on scientific research in in-house research and development facility by firms extended to include business of biotechnology also .

* Benefits of tax deduction on expenditure on in-house research and development in relation to drugs and pharmaceuticals to include expenditure incurred on clinical drug trial and obtaining approval from any regulatory authority and filling an application for an patent under the patents act .


As a follow- up of the High Level Dialogue on Science and Technology, the Indo-U.S. Forum on Science and Technology was launched on July 20, 2000. The forum is a registered society and aims to promote co-operation between the two countries in the field of science and technology.

The Forum will catalyze cooperative activities by bringing together senior scientists from industry, academia, and the government to identify specific areas of promise.

Gist of the Bill

The Government of India has passed the Information Technology Bill (May, 2000). The Bill provides a legal framework for the information to have legal effect, validity or enforceability in the form of electronic records. The Bill provides that, unless otherwise agreed, an acceptance of contract may be expressed by electronic means of communication. The Bill provides to facilitate electronic intercourse in trade and commerce, eliminate barriers to electronic commerce resulting from uncertainties over writing and signature requirements and to promote the development of the legal and business infrastructure necessary to implement electronic commerce. The legal framework for authentication and origin of electronic record/communication through digital signature has been proposed.

The Bill provides for appointment of certification authorities for the purpose of licensing, certifying, monitoring and appointment of the Controller to oversee the activities and regulation of Certifying Authorities. It includes provisions for the penalties in the form of compensation for computer crimes, such as unauthorized access to computer network, computer database, computer virus, damage to computer system, disruption of computer services, copying of software and offenses such as tampering with the computer source documents, electronic forgery and other types of computer crimes. The Bill aims to empower Central Government or any officer authorized in this regard to disrupt any message transmitted in the electronic or encrypted form in the interest of sovereignty, integrity and security of State, friendly relations with foreign states or public order for preventing incitement to the commission of an offense for reasons to be recorded in writing by order.

As more and more activities are carried out by electronic means, it becomes more and more important that evidence of these activities be available to demonstrate legal rights and obligation that flow from them. The Bill proposes amendments in the existing Acts such as Indian Evidence Act 1872, Indian Penal Code 1860, amendments to Section 2 of the Banker's Book Evidence Act and amendment of RBI Act, 1934.

         Biodiversity Bill (May 2000)

The Government of India also approved the Biodiversity Bill for the conservation of biodiversity. The bill envisages setting up of  a National Biodiversity Authority to regulate the movement of bio-resources in the country.

The Government of India announced the cutoff for the 10-year tax holiday until 2010 for units in Software Technology Parks (STPs) and Free Trade Zones (FTZs). This means units registering up to that point would be eligible for a tax holiday up to 2010. This announcement will encourage R&D in knowledge-based industries, particularly in pharmaceutical and biotechnology; as a 10-year tax holiday is also proposed to be extended to R&D companies. Additionally, the weighted deduction for expenses for these companies has been increased from 125 per cent to 150 per cent.

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