DEDUCTION U/S 32AC

Section 32AC is introduced vide Finance Act, 2013 as an investment linked incentive for attracting new investment and to quicken the implementation of projects by providing an incentive for acquisition and installation of new high value Plant or Machinery to manufacturing companies.

For AY 2014-15 & AY 2015-16 [Sec 32AC (1)]

A deduction of 15% of the actual cost of Plant & machinery acquired and installed by a manufacturing company between April 1, 2013 and March 31, 2015. A company is eligible for claiming the deduction u/s 32AC subject to following conditions:

1.  The company should be engaged in the business of manufacturing of an article or thing.
2. The actual cost of new Plant or Machinery should exceed INR 100 crore (aggregate) and such Plant or Machinery should be acquired and installed (both) during the period 1 April 2013 to 31 March 2015.
3. The deduction shall be available in the financial year in which the aggregate cost exceeds INR 100 crore.
4. The Plant or Machinery should not include office equipments, computers and computer software, Plant or Machinery installed in office premises or any residential accommodation, vehicles, ship or aircraft or any second hand Plant and Machinery.
5. Such Plant or Machinery cannot be sold or otherwise transferred within a period of 5 years from the date of its installation, otherwise the deduction allowed would be taxable as business income in the year of transfer. However, transfer can be made under amalgamation or demerger but the restriction of 5 years would apply to the amalgamated or demerged company.

For AY 2015-16 & AY 2017-18 [Sec 32AC (1A)]

Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium-size investments in plant and machinery eligible for deduction, a new sub section (1A) has been introduced vide Finance Act, 2014 which provide that a deduction u/s. 32AC (1A) shall be allowed if a company, on or after 1st April, 2014, invests more than Rs. 25 crore in plant and machinery in the previous year subject to following conditions:

1. The company should be engaged in the business of manufacturing of an article or thing.
2.  Deduction shall be 15% of actual cost of new plant or machinery.
3. Acquisition & installation both should be done in the same previous year.
4. The Plant or Machinery should not include office equipment’s, computers and computer software, Plant or Machinery installed in office premises or any residential accommodation, vehicles, ship or aircraft or any second hand Plant and Machinery.
5. No deduction shall be allowed under section 32AC(1A) for AY 2015-16 where an assessee is eligible to claim deduction under sub section (1) i.e. where aggregate value of new plant & machinery acquired and installed during the period 01-04-13 to 31-03-15 exceed Rs. 100 crore. Such Plant or Machinery cannot be sold or otherwise transferred within a period of 5 years from the date of its installation, otherwise the deduction allowed would be taxable as business income in the year of transfer. However, transfer can be made under amalgamation or demerger but the restriction of 5 years would apply to the amalgamated or demerged company.