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investment in new plant machinery Deduction

investment in new plant machinery Deduction

[Section 32AC] deals with Deduction for investment in new plant and machinery

Existing Provisions relating to Deduction for investment in new plant and machinery  [Effective from A.Y.2014-15]:

(i) Section 32AC was inserted by the Finance Act, 2013 w.e.f. A.Y.2014-15 to provide a tax incentive by way of investment allowance to encourage huge investment in plant or machinery.

(ii) As per section 32AC(1), a manufacturing company is entitled to deduction@15% of aggregate investment in new plant and machinery if it is –

(a) engaged in the business of manufacture of an article or thing; and

(b) invests a sum of more than ` 100 crore in new plant or machinery during the period beginning from 1st April, 2013 and ending on 31st March, 2015.

investment in new plant machinery Deduction

(iii) For A.Y. 2014-15, a manufacturing company was entitled to deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the aggregate cost of such assets exceed ` 100 crore.

For A.Y.2015-16, a deduction of 15% of aggregate amount of actual cost of new assets, acquired and installed during the period beginning on 1st April, 2013 and ending on 31st March, 2015, as reduced by the deduction allowed, if any, for A.Y. 2014-15.

(iv) The deduction@15% under this section is in addition to the depreciation and additional depreciation allowable under section 32(1). Further, the deduction under section 32AC would not be reduced to arrive at the written down value of plant and machinery.

Additional benefit [Under sub-section (1A) inserted in section 32AC by Finance (No.2) Act, 2014, with effect from A.Y.2015-16]

(v) This year, considering that growth of the manufacturing sector is critical for employment generation and development of an economy, the deduction available under section 32AC has been extended for investment made in plant and machinery up to 31.03.2017.

Further, in order to rationalize the existing provisions of section 32AC and also to make medium size investments in plant and machinery eligible for deduction, new sub-section (1A) has been inserted to provide that deduction under section 32AC would be available if the company, on or after 1st April, 2014, invests more than ` 25 crore in plant and machinery in a previous year.

investment in new plant machinery Deduction

(vi) Companies which are eligible to claim deduction under the existing combined threshold limit of “more than ` 100 crore” for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under section 32AC(1), even if its investment in the year 2014-15 is below the new threshold limit of investment of ` 25 crore.

investment in new plant machinery Deduction

(vii) “New plant or machinery” does not include—

(1) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;

investment in new plant machinery Deduction

(2) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;

(3) any office appliances including computers or computer software;

(4) any vehicle;

(5) ship or aircraft; or

(6) any plant or machinery, the whole of the actual cost of which is allowed as deduction

(whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.

investment in new plant machinery Deduction

(viii) The new plant and machinery in respect of which deduction has been claimed under section 32AC cannot be sold or otherwise transferred for a period of 5 years from the date of installation. If it is sold or transferred within this period, the deduction allowed earlier would be deemed as income chargeable to tax under the head “Profits and gains of business or profession” of the previous year in which such new plant and machinery is sold or otherwise transferred. This would be in addition to the taxability of gains on transfer of such plant and machinery.

In case of amalgamation or demerger, this restriction would continue to apply to the amalgamated company or resulting company,the amalgamating or demerged company.

 

With regards,

Thank You

investment in new plant machinery Deduction

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investment in new plant machinery Deduction

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