India Budget Series


The existing provision of Section 32AC(1A) provides for an investment allowance at the rate of 15% for purchase of new plant and machinery exceeding Rs.25 crores by a company engaged in manufacturing or production of any article provided that acquisition and installation of the said plant and machinery is done in the same previous year.

As the benefit under this Section is available upto 31.03.2017, it is proposed to amend the said Section to eliminate the dual condition of acquisition and installation in the same previous year and it is further proposed that benefit shall be allowed in the year when new plant and machinery is installed in case where the year of installation is other than year of acquisition.

For example, if a company acquires new plant and machinery on 01.03.2016 for Rs.30 crores and the same is installed on 30.04.2016, as per the existing provisions, the deduction of investment allowance at the rate of 15% shall not be allowed as the said plant and machinery are not acquired and installed in the same previous year. However, as per the amendment, the investment allowance of Rs.4.5 crores (15% of 30 crores) shall now be available to the Company for the year ended 31.03.2017.

This amendment was inserted due to the practical difficulty of commissioning plants as the quantum is above Rs.25 crores. Hence the conditions have been liberalised with greater focus on the intention of promoting the Make in India campaign.

This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and 2017-18.

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