Research and development expenses that meet the requirements of being wholly, exclusively, and necessarily incurred during the year by the person and in the production of income from the business or investment may be deducted, irrespective of whether they are of a capital nature.

Research and development expenses refer to expenses incurred by a person in the process of developing the person’s business and improving business products or processes. However, these expenses exclude those that are included in the cost of an asset used in the research and development process.

(4 marks)