Section 32AC: Investment Allowance
There are several policies which affect the businessman, most important is the additional Incentive for acquisition and installation of new plant or machinery by manufacturing company as investment allowance of 15% on capital investment of over Rs 100 crore (this is above the depreciation benefits enjoyed).
A new section 32AC in the Income- tax Act is proposed to be inserted to provide to provide additional deduction to such assessee, where an assessee, being a company,—
(a) is engaged in the business of manufacture of an article or thing; and
(b) invests a sum of more than Rs. 100 crore in new assets (plant or machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015,then, the assessee shall be allowed—
(i) for assessment year 2014-15, a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the cost of such assets exceeds Rs. 100 crore;
(ii) for assessment year 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 assessment year 2014-15.
(iii) Lock in Period of 5 Years
Note: This is over & above Normal & Additional Depreciation.
The phrase “new asset” has been defined as new plant or machinery but does not include—
(i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;
(ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle;
(v) ship or aircraft; or
(vi) 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.
It is further proposed to provide suitable safeguards so as to restrict the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply in a case of amalgamation or demerger but shall continue to apply to the amalgamated company or resulting company, as the case may be.
This amendment will take effect from 1st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.