March 2011

There is an increasing trend for providing fiscal and tax incentives for scientific research and development. It has also been observed that Government of India has been increasing the fiscal incentives for the Capital and revenue expenditure incurred either directly for in-house research or by way of contribution to recognized scientific and research institutions. It is further evident from the Union Budget Proposals of the Hon'ble Finance Minister in the Finance Bill 2011 where the Contribution to National Laboratories, IITs Universities and other Approved Scientific Research Institutions have been increased from the existing weighted deduction of 175% to 200% u/s. 35(2AA) of the Income Tax Act, 1961. In other words if an assessee pays Rs.5 lakhs to any of IITs in India in a financial year, he will get a deduction of Rs.10 lakh while computing his taxable income and thus if he is under the tax bracket of 30%, he gets the tax benefit of Rs.3,00,000/- on Rs. 5,00,000/-spent by him. This is a substantial benefit.

In the last year's budget presented on 26th February 2010 a similar tax concession was allowed for in-house research by the companies engaged in manufacturing drugs, pharmaceuticals, electronics equipments, computers, telecommunication equipments, chemicals etc., by increasing the weighted deduction from the existing limit of 150% to 200% under section 35(2AB) of the Income Tax Act, 1961.

India spends less than 1 percent of its GDP on research and development as against the average of 3 percent by most of the developed countries. However there is a growing need for encouraging more research activities in the country if we really desire to be an important economic power in the present era of knowledge and innovation. The National Innovation Commission should take some immediate measures including persuading Government of India to pass the National Innovation Bill pending for long in the Indian Parliament. Innovation is the engine of knowledge economy in today's world and R&D is the key ingredient of the innovation process. There is also a need for providing direct financial support in the form of subsidies apart from the fiscal (or tax) incentives without discrimination between the private and the public sector.

Ministry of Science and Technology (S & T) has various departments including Department of Bio Technology (DBT) Department of Science and Technology (DST) and Department of Scientific and Industrial Research (DSIR) apart from several autonomous bodies, Councils, PSU, Joint Ventures and other approved Institutions for conducting scientific research. Thus while the basic scientific research activities are undertaken by the Ministry of Science and Technology (S & T), the protection of the research which is in the form of Patents are under the Ministry of Commerce under the Department of Industrial Policy and Planning.

There is thus a gap between the basic research or the intellectual Property (IP) activities and the protection or safety of the research in the form of intellectual property rights (IPR). This is resembled in the poor level of human infrastructure at the Indian Patent Offices. The number of pending patents were 83686 as on March 8, 2011 as per the statement made by Commerce Minister for State in the Lok Sabha and considering the scarcity of the examiners in the Indian Patent Office, with an awefully low level of filing of the number of applications in India as compared to advanced countries including China and the dormant position of India as International Search Authority witness some fundamental weakness in our Patent System.

On the one hand, we are striving for innovation to make our Country globally competitive, but on the other hand, we are quite indifferent in making our country strong in the Patent protection and enforcement. It would be worth mentioning that counterfeiting and piracy of the innovations and creativity of human genius is a burning problem in India and around the World.

The estimated value of counterfeiting at global level is likely to reach US$ 1.7 trillion by 2015 as brought to notice before the Sixth Global Congress on combating counterfeiting and piracy in Paris, France on February 2-3, 2011 under the aegis of WIPO, World Customs Organisation (WCO), Interpol, International Chamber of Commerce (ICC) and the International Trade Mark Association (INTA), that should act as an eye opener for the World Community.

- Dr. D. R. Agarwal