Investment Allowance - Section 32AC - Income Tax - Ready Reckoner - Income Tax

Investment Allowance - Section 32AC Section 32AC has been inserted to provide for investment allowance in order to encourage substantial investment in new plant and machinery. Apart from normal depreciation, Investment Allowance is also available on new machinery installed during 2013-14(FY/PY) and 2014-15. Eligible Assessee: Deduction is available only to a Company (Indian as well Foreign) and Company must be engaged in the business or manufacture or production of any article or thing. Conditions to be satisfied: Section 32AC(1) i.e. 100 CRORES SCHEME Assessee acquires and installs the new plant machinery on or after 1 st April 2013 but on or before 31 st March 2015 (both acquisition and installation should be completed within the above mentioned period) and Aggregate amount of actual cost of such new plant machinery should exceed 100 crores. Section 32AC(1A) i.e. 25 CRORES SCHEME Assessee acquires and installs the new plant machinery during the previous year 31-03-2015 or previous year 31-03-2016 or previous year 31-03-2017 Both acquisition and installation should be in same previous year. If the assessee acquires new plant machinery of 30 crores in PY 31-03-2015 and installs the same in PY 31-03-2016, then deductions shall not be available in PY 31-03-2015 as well as in PY 31-03-2016. Amount of Deduction: Section 32AC(1) For AY 2014-15 15% of the actual cost of new plant machinery acquired and installed during previous year 2013-14, if actual cost exceeds 100 crores. For AY 2015-16 15% of the actual cost of new plant machinery acquired and installed during previous year 2013-14 and 2014-15, if actual cost exceeds 100 crores, as reduced by deduction already allowed in AY 2014-15 Section 32AC(1A) For AY 2015-16 15% of the actual cost of plant machinery acquired and installed in previous year 31-03-2015, if its actual cost exceeds 25 crores. For AY 2016-17 15% of the actual cost of plant machinery acquired and installed in previous year 31-03-2016, if its actual cost exceeds 25 crores. For AY 2017-18 15% of the actual cost of plant machinery acquired and installed in previous year 31-03-2017, if its actual cost exceeds 25 crores. No deduction shall be allowed for any assessment year commencing on or after the 1st day of April, 2018 u/s 32AC(1A) . [Section 32AC(1B) ] Lock-In-Period: There shall be a lock-in-period of 5 years from the date of installation. If new plant machinery on which investment allowance deduction has been availed, has been sold or transferred within 5 years from the date of installation, then deduction allowed under section 32AC shall be deemed to be the income under the head PGBP of the year in which plant machinery is sold. This shall however not apply if plant and machinery is transferred in a scheme of amalgamation or demerger. However, the amalgamated company or the resulting company should not transfer the new asset within 5 years (from its installation by amalgamating or demerged company). Plant Machinery not eligible for deduction i. Ship or aircraft ii. Any plant or machinery which before its installation by the assessee was used either within or outside India by any other person. iii. Any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house. iv. Any office appliances, including computers or computer software. v. Any vehicle 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. Points to be Noted: This deduction is in addition to the depreciation and additional depreciation. Deduction u/s 32AC shall not be reduced from the WDV of block of asset. To claim deduction u/s 32AC , there is no condition that plant and machinery should be actually put to use. This deduction is not available to power generating units. The deduction will not be restricted to 50%, if plant and machinery purchased and installed is used for less than 180 days during the previous year.