Budget 2016 -Extending the benefit of initial additional depreciation under section 32(1)(iia) for power sector
Under the existing provisions of section 32(1 )(iia) of the Act, additional depreciation of 20% is allowed in respect of the cost of new plant or machinery acquired and installed by certain assessees engaged in the business of generation and distribution of power . This depreciation allowance is over and above the deduction allowed for general depreciation under section 32(1 )(ii) of the Act.
Under the existing provisions, the benefit of additional depreciation is not available on the new machinery or plant installed by an assessee engaged in the business of transmission of power.
In order to rationalise the incentive of power sector , it is proposed to amend this section so as to provide that an assessee engaged in the business of transmission of power shall also be allowed additional depreciation at the rate of 20% of actual cost of new machinery or plant acquired and installed in a previous year.
This amendment will take effect from 1stApril, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent assessment years.
Clause 13 of Finance Bill 2016
Clause 13 of the Bill seeks to amend section 32 of the Income-tax Act relating to depreciation.
Under the existing provisions contained in clause (iia) of subsection (1) of section 32, a sum equal to twenty per cent. of the actual cost of new machinery or plant (other than ships and aircraft) acquired and installed after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power, is allowed as deduction as further depreciation in the year of acquisition and instalment.
It is proposed to amend the said clause (iia) so as to provide that the deduction under the said clause shall also be allowed to the business of transmission of power.
This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to assessment year 2017-2018 and subsequent years.