DT: Know everything about newly inserted section 32AD

Click on the following links to read the amendments provided in the previous posts

1. Amendments in Charitable Purpose and Income definition

2. Amendments in Period of Holding and Residential Status

3. Amendment in Additional Depreciation

Today, we are posting the newly inserted section 32AD which is quite similar to section 32AC.

Section 32AD: Additional investment allowance

Additional investment allowance will be available under section 32AD. This deduction will be in addition to the existing deduction available under section 32AC. Accordingly, if an undertaking is set-up in the notified backward areas in Andhra Pradesh, Bihar, Telangana or West Bengal by a company, it shall be eligible to claim deduction under the existing provisions of section 32AC as well as under section 32AD if it fulfils the conditions specified in the said section 32AC and conditions specified under section 32AD.

Conditions for claiming deduction under section 32AD

1.       The assessee may be a company or any other person.

2.       He/it sets-up an undertaking/enterprise for manufacture or production of any article or thing on or after April 1, 2015.

3.       Such undertaking must be set-up in any backward area in Andhra Pradesh, Bihar, Telanagana or West Bengal.

4.       He/it acquires and installs a “new asset”. “New asset” for this purpose is a new plant or machinery. However, it does not include the following assets:-

a.       Any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;

b.      Any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;

c.       Any office appliances including computers or computer software;

d.      Any vehicle;

e.      Ship or aircraft;

f.        Any plant or machinery, the whole of the actual cost of which is allowed as deduction in computing the income chargeable under the head “P/G/B/P” of any previous year.

5.       The new asset should be acquired and installed after March 31, 2015 but before April 1, 2020. Both ‘acquisition’ and ‘installation’ of new plant and machinery are required to be made after March 31, 2015 but before April 1, 2020.

Quantum of investment allowance: 15 per cent of actual cost of “new asset”. It will be available in the year in which the new asset is installed if all the above conditions are satisfied.

Lock in Period: 5 years