Amendment of section 32
10. In section 32 of the Income-tax Act, in sub-section (1), with effect from the 1st day of April, 2016,-
(a) in clause (ii),-
(A) in the second proviso, after the words, brackets, figures and letter “asset referred to in clause (i) or clause (ii) or clause (iia)”, the words, brackets, figures and letter “or the first proviso to clause (iia)” shall be inserted;
(B) after the second proviso, the following proviso shall be inserted, namely:-
“Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent. of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:”;
(b) in clause (iia),-
(A) in the proviso, for the word “Provided”, the words “Provided further” shall be substituted;
(B) before the proviso, the following proviso shall be inserted, namely:-
“Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Telangana, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words “twenty per cent.”, the words “thirty-five per cent.” had been substituted:”.
Notes on Clauses:
Clause 10 of the Bill seeks to amend section 32 of the Income tax Act relating to depreciation.
Under the existing provisions contained in clause (iia) of subsection (1) of the aforesaid section, a further sum equal to twenty per cent. of the actual cost of new machinery or plant (other than ships and aircraft) acquired and installed after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power, is allowed as deduction as further depreciation.
It is proposed to insert a proviso in clause (iia) of sub-section (1) of the aforesaid section to provide that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Telangana, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect as if for the words “twenty per cent.”, the words “thirty-five per cent.” had been substituted:
Consequentially, it is proposed to insert the reference of newly inserted proviso in clause (iia) in the second proviso to sub-section (1) of the aforesaid section 32.
The existing provisions contained in the second proviso to subsection (1) of the aforesaid section 32 provide that where an asset referred to in clause (i) or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under sub-section (1) in respect of such asset shall be restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be.
It is proposed to insert a proviso after the second proviso to sub-section (1) of section 32 so as to provide that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year and the deduction under sub-section (1) in respect of such asset is restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent. of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under sub-section (1) in the immediately succeeding previous year in respect of such asset.
These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016- 17 and subsequent years.
