Union Budget 2016: The existing provision of sub-section (1A) in section 32AC of the Act provides for investment allowance at the rate of 15% on investment made in new assets (plant and machinery) exceeding Rs.25 crore in a previous year by a company engaged in manufacturing or production of any article or thing subject to the condition that the acquisition and installation has to be done in the same previous year. This tax incentive is available up to 31 .03.2017.

The dual condition of acquisition and installation causes genuine hardship in cases in which assets having been acquired could not be installed in same previous year.

It is proposed to amend the sub-section (1A) of section 32AC so as to provide that the acquisition of the plant & machinery of the specified value has to be made in the previous year. However, installation may be made by 31.03.2017 in order to avail the benefit of investment allowance of 15%. It is further proposed to provide that where the installation of the new asset is in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new asset is installed.

These amendments will take effect retrospectively from 1 stApril, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and 2017-18.

Clause 14 of Finance Bill 2016

Clause 14 of the Bill seeks to amend section 32AC of the Income-tax Act relating to investment in new plant or machinery.

Sub-section (1A) of the aforesaid section, inter alia, allows a deduction of a sum equal to fifteen per cent. of the actual cost of new machinery or plant (other than ship or aircrafts), acquired and installed by an assessee being a company engaged in the business of manufacture or production of any article or thing during any financial year, exceeds twenty-five crore rupees, if the acquisition and installation is made during the same financial year.

It is proposed to amend the said sub-section so as to provide that the deduction under the said sub-section shall be allowed if the assets are installed on or before the 31st March, 2017.

It is further proposed to insert a new proviso in the said sub­section so as to provide that where the installation of the new assets are in a year other than the year of acquisition, the deduction under the said sub-section shall be allowed in the year in which such new assets are installed.

These amendments will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-2017 and subsequent years.

[Clause 14]

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