Allowance of balance 50% additional depreciation

[Admin TMI]

Question - What are the proposed in Finance Bill 2015 to encourage investment in plant or machinery by the manufacturing and power sector ?

[Admin TMI]

Allowance of balance 50% additional depreciation

To encourage investment in plant or machinery by the manufacturing and power sector, additional depreciation of 20% of the cost of new plant or machinery acquired and installed is allowed under the existing provisions of section 32(1)(iia) of the Act over and above the general depreciation allowance. On the lines of allowability of general depreciation allowance, the second proviso to section 32(1) inter alia provides that the additional depreciation would be restricted to 50% when the new plant or machinery acquired and installed by the assessee, is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in the previous year. Non-availability of full 100% of additional depreciation for acquisition and installation of new plant or machinery in the second half of the year may motivate the assessee to defer such investment to the next year for availing full 100% of additional depreciation in the next year. To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50% of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year.

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

AI Summary

Additional depreciation allowance extended for short-use plant or machinery; balance permitted in succeeding year to remove discrimination The Finance Bill 2015 proposes that the balance 50% of additional depreciation on new plant or machinery not allowed in the year of acquisition because the asset was used for less than the prescribed usage-period shall be allowed in the immediately succeeding previous year, thereby removing the discrimination between assets used for shorter and longer periods in the year of acquisition and encouraging investment by the manufacturing and power sectors.