Section 25 Company:

A section 25 company is identical to an ordinary company in all respects except that it is not
established for profit and commercial gain. According to section 25(1)(a) and (b) of the Indian
Companies Act, 1956, a section-25 company can be established ‘for promoting commerce, art,
science, religion, charity or any other useful object’, provided the profits, if any, or other income is
applied for promoting only the objects of the company and no dividend is paid to its members.

The same procedure involved in setting up a public or private company will be applied to that of
registering a section 25 company. The only modifications would be to the MoA and AoA in that it
would have to be mentioned the profits of the company will not be distributed s dividend. At the
time f filing the MoA and AoA another statement asking for registration under Section 25 must be
made to the Registrar of Companies.

Key Conditions:

 Profit or Income of the Company shall be applied for the promotion of the main object
 Declaration of dividend or distribution of profit to the promoters is not allowed
 No member shall be appointed as a remunerated officer
 No remuneration / benefit shall be paid to a member being a servant / officer of the
Company (except reimbursement of out of pocket expenses, reasonable interest on money
lent or reasonable rent on the premises)
 Subsequent alteration of MoA & AoA requires prior approval of Central Govt. (i.e. Regional
Director)

Advantages:

Liability: A Company exists as a separate legal entity from your personal life. Both company and
person who own it are separate entities and both functions separately. Liability for repayment of
debts and lawsuits incurred by the Company, lies on it and not the owner. Any business with
potential for lawsuits should consider incorporation. Incorporating will offer an added layer of
protection

Perpetual Succession: An incorporated company has perpetual succession. Notwithstanding any

changes in the members of the Company, the Company will be a same entity with the same
privileges, immunities, estates and possessions. The Company shall continue ton exist till its wound
up in accordance with the provisions of the relevant law

Easy Transferable: The shares and other interest of any member in the Company can be transferable
in the manner provided by the Articles, which is otherwise not easily possible in other business
forms. It is easier to become or leave the membership of the Company or otherwise it is easier to
transfer the ownership

Separate Property: A Company as legal entity is capable of owning its funds and other properties.
The Company is the real person in which all the property is vested and by which it is controlled,
managed and disposed off. The property of Company is not the property of its shareholders
Raising Money: A Company can sell shares of the Company to the public or can accept deposits from
public and can therefore raise money easier than other business structure types. The modes of
financing business carried on by company are numerous

Privileges under the Companies Act: (a) Exemption from requirement of Minimum Paid-up capital.
(b) Exemption of Stamp duty for registration. (c) Non-application of Companies Auditor’s Report
Order (CARO) 2003. (d) Exemption of Stamp duty for registration.

Benefits available for "In-house R&D Centres" of companies are -.

   
200% of the total expenditure whether Revenue or Capital in nature  -
Weighted Deduction in Income Tax for 3 years & more.
   
Duty free import of specified goods (Analytical & specialty equipments)
   
Commercial R&D companies eligible for 10yrs. tax holiday
   
Other Benefits – Excise duty waiver for 3 yrs., Custom & Excise duty
exemption, state subsidy etc.
   
 
  Financial and other incentives To R & D Centre:
 
 
Write off of revenue expenditure on R&D ;

Write off of capital expenditure on R&D in the year the expenditure

incurred;

 
  Weighted tax deduction of 175% to the sponsor of sponsored research
programmes in universities, IIT’s and approved national laboratories.
 

Weighted tax deduction @ 200% on R&D expenditure incurred in the

approved in-house R&D centre of biotechnology or in the business of
manufacture or production of any drugs. Pharmaceuticals, electronic
equipments, computers, telecommunication equipments, chemicals,
aircrafts and helicopters, automobiles including automobile components, or,
any other article thing notified. Expenditure on scientific research in
relation to drugs and pharmaceuticals shall include expenditure incurred on
clinical drug trials, obtaining approvals from any regulatory authority under
any Central, State or Provincial Act and filling an application for a patent.
  The Ministries/ Govt. Depts. involved in giving approvals are:
 
   Ministry of Finance
 Ministry of Chemicals
 Ministry of Commerce
  Ministry of Science and Technology
 Ministry of Heavy Industries
 Ministry of Shipping, Road Transport and Highways
 Ministry of Small Scale Industries
 Ministry of Statistics and Programme Implementation
 Ministry of Steel
 Ministry of Environment
 Department of Industrial Development
 Department of Electronics
 Department of Telecommunication
 Department of Bio-Technology
 Department of Food Processing
 Indian Council of Agriculture Research
 Council of Scientific & Industrial Research
 Indian Council of Medical Research
 Defence Research & Development Organisation
 Department of Atomic Energy
 Department of Space

Tax holiday for ten consecutive assessment years beginning from initial

assessment year companies, whose sole object is The Scientific and
Industrial Research and Development , and who are approved after the
31st day of March 2000.

Income tax exemption @ 175% to Donations made to approved

Scientific and Industrial Research Organisations.

Accelerated depreciation allowance for investment on plant and

machinery made on the basis of indigenous technology.

Customs duty exemption to public funded R&D institutions and

privately funded scientific and industrial research organisations, both for
capital equipment and consumables needed for R&D

Excise duty exemption to duty exemption for 3 years on goods designed

and developed by a wholly owned Indian company and patented in any two
countries out of India , USA, Japan and any one country of European Union

Exemption from customs duty on imports made by industry for R&D

projects.

Exemption from price Control of Drugs (Prices Control) Order for drugs,
which have been developed indigenously or produced through a process,
developed through indigenous R&D.

Pharmaceutical reference standards are allowed to be imported duty free.

Goods specified in List 28 (Comprising of analytical and specialty

equipment)for use in

pharmaceutical and biotechnology sector are allowed to be imported duty

free meeting certain condition. 
Supports in the form of Grants for industrial R&D projects.

Support in the form of loans/Grants for industrial R&D. Support to

industry for R & D through sector specific programmes of scientific and
economic ministries.

Association of industry with the national R&D programmes in area of

Atomic Energy Space and Defence research.

Promotion of technology transfer from national laboratories and

nationally funded R&D Programmers to industry through public sector
organisations.

Financial support to meet the developmental expenditure for -

 R&D Project for development of a new/improved product

 R&D Project for development of a new/improved process
 R&D Project for development of Capital Goods for Indian/Export
market
 R&D Project for absorption of imported technology with know-how
studies