Extension of weighted deduction for R&D expenditure beyond one year
Written by Anand, Arjun   
Tuesday, 14 July 2009
New Delhi: With reference to the budget announcement of allowing 150% weighted deduction under the income Tax Act for in-house R&D expenditure for all sectors, Shri Vilasrao Deshmukh, Minister of Heavy Industries & Public Enterprises will request the Ministry of Finance to extend weighted deduction for R&D expenditure beyond one year, in the interest of the Industry.

He was speaking at his first interactive session with the captains of the Capital goods industry, after assuming office as the Minister of Heavy Industries & Public Enterprises.

The interactive session organized by the Confederation of Indian Industry (CII) in Mumbai, brought out the challenges and opportunities before the heavy industries sector and sought the support and guidance from the Heavy Industries Ministry.

"The Capital Goods Sector which grew at a rate of 18% during 2007-08 registered a growth of 7% only in 2008-09. The capital goods customers are rescheduling their order and postponing the acceptance of deliveries, which is a cause of concern for the sector", stressed the Minister.

Shri Deshmukh said that the current budget had accepted few of the recommendations of his Ministry but a lot more could be expected from the next budget. He stated that the current budget had stepped up investments. Increased allocations of public spending on national highways, building infrastructure and railways would result in generating more demand for the capital goods sector. “There are tremendous growth opportunities in areas as railways, defence, power, nuclear energy, aeronautics, and others.”

"Our endeavour is to support Capital Goods Industry so that it can help Indian manufacturing industry to meet the challenge of global competition and sustain the growth momentum in exports," asserted Shri Vilasrao Deshmukh.

Due to a host of factors including poor demand and global economic meltdown, capital goods sector had shown a lack luster performance in the recents months.This, Shri Deshmukh remarked had to be improved. He stated that the two stimulus packages were already being implemented and within some time it would show its results.

He outlined number of initiatives already taken up by the Government for sustained and inclusive growth of all the sectors.

“To provide long term financial assistance to infrastructure projects, the Government has already set up India Infrastructure Finance Company Limited, which will refinance 60% of commercial bank loans for PPP projects in critical sectors”, highlighted Shri Deshmukh.

Dr S N Dash, Secretary, Heavy Industries said that the industry seems to have bottomed out which is evident from the recovery in the auto sector. Referring to the issue of second hand imports affecting the industry, he said that the matter has been taken up with the Planning Commission and some decision could be evolved to the satisfaction of all concerned.

“Capital goods industry is very important to the health and growth of any economy”, said Mr J P Nayak, Chairman CII National Committee on Capital Goods and Engineering. Considering capital goods sector as the mother of manufacturing sector, Mr Nayak stated that cost and availability of finance especially for the SME sector, improvement of technology, and removal of fiscal and regulatory anomalies need to be focused on for the sustained growth of the capital goods sector.

150% weighted deduction for in-house R&D expenditure

Another significant discussion at the CII interactive session was regarding the announcement of allowing 150% weighted deduction under the income Tax Act for in-house R&D expenditure for all sectors. There was unanimous recommendation of the gathering that the Government should consider extending this deduction to a longer period than the proposed one year, as R&D has long gestation period and important for enhancing the technological edge of the industry. Shri Deshmukh readily agreed to take up the matter with the concerned ministry and said that the Government would actively consider the recommendation.

Task force

The interactive session with the Hon’ble minister saw a number of recommendations from the industry representatives. It was suggested that a task force be set up with a time bound programme to take up the long pending concerns of the industry. It was assured that this would be taken up immediately with the existing committees.

Abolishment of octroi

Also the consistent demand for abolishment of octroi was taken up. It was expressed that octroi being a major source of revenue for the State, an alternative would have to be first worked out before proposing its abolishment. However octroi could be abolished in case of exports, agreed Shri Deshmukh.

Power as infrastructure

Another recommendation from the industry stalwarts was that power be given the status of being included as infrastructure. While readily agreeing that power was infrastructure, Shri Deshmukh consented to take up the matter with the concerned ministry and requested the industry to build up the case in this regard.

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