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Apart from normal depreciation and additional depreciation, Investment Allowance is also available on new machinery installed during 2013-14(FY/PY) and 2014-15

 

Amt of Deduction:-

  • It is 15% of new machines purchased and /or   installed  (New Amendment) in one year is more than 25 Crores 
  • This Investment Allowance is only for FY 2014-15,FY 2015-16 AND FY 2016-17 (FY means Financial year)
  • Earlier It was 15% of new machines installed in FY 2013-14 and  FY 2014-15 if aggregate of machine cost exceeds 100 Cr total of both years combined.
  • Unlike Additional depreciation.Investment Allowance is not reduced while calculating Closing WDV

Effect of Amendment 

EARLIER

NOW

Assets more than 25 cr must be purchased and installed in Same Year to Get  Investment Allowance Deduction

Assets more than 25 cr must be purchased in FY 2014-15,FY 2015-16.FY 2016-17

It may be installed later also till 31.3.2017

Still deduction will be available

If purchased but not installed then no Investment Allowance

Suppose Asset purchased for 100 Cr in FY 2015-16 but installed in FY 2016-17

Then NO Deduction  will be available as not installed in same year

Deduction Available in the Year Installed

Suppose Asset purchased for 100 Cr in FY 2015-16 but installed in FY 2016-17

Then 15% Deduction will be Available in FY 2016-17


Current Provisons

EARLIER   NOW  

FY 2013-14            +

FY 2014-15

15% Deduction if Assets >100 Crores

Option 1

FY 2013-14            +

FY 2014-15

15% Deduction if Assets >100 Crores
 

Option 2

FY 2014-15

Or 

FY 2015-16

Or

FY 2016-17               

15% Deduction if Assets >25 Crores in 1 year

 

Assessee can claim either of Option 1 or Option 2 and not both

 

Format

Depreciation and Deduction Computation

Name of Asset Block 1 Machine
Opening Value xx
Add  
Purchases 180 days or more xx
Purchase Less than 180 days xx
Less  
Sales During Year xx
Cl Value before Dep xx
Less  
Depreciation  xx
Additional Dep xx
Closing WDV(after Dep) xx
   
Investment Allowance @ 15%  
(not reduced from Closing WDV)  xx

 PGBP Computation

Indirect Method Amount in Crores
Profit xx
Add  
Expense disallowed  
Dep as per Companied Act xx
   
Less  
Expense Allowed  
Dep as per Income Tax xx
   
Additional Depreciation xx
   
Investment Allowance xx
   
   
PGBP Income xx

 

Conditions to Claim Investment Allowance

1.It is available only on purchase of new machinery.

  Additional Depreciation is only on Plant and Machinery,not other assets like Furniture and Buildings

 

2. On Following Plant and Machinery also(P&M), no Investment Allowance

  • Ships and Aircrafts
  • Second hand P& M
  • P& M  used in Office/Home/Guest house
  • Office Appliances
  • Road  Transport Vehicles (Car etc)
  • 100% Dep reciable Assets (like Pollution Control Equipment)

3.I nvestment Allowance is only for factories or power generation units, not for dealers or service providers

 

4 It is only available to manufacturing companies on new machines installed.

 

5 Deduction only for Companies(not for Non Companies like Partnership/Proprietorship)

 

 

 

Que 1

Compute Deduction for 2013-14 and 2014-15 in following cases

Case 2013-14 2014-15
I 80 20
II 80 21
III 110 20
IV 110 1
V 5 25
VI 5 26

-a-

Case 2013-14 2014-15 Total Deduction in 2013-14 Deduction in 2014-15
I 80 20 100 No deduction in 2013-14 as amount does not exceed 100 Crores No deduction as total amt does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores
II 80 21 101 No deduction in 2013-14 as amount does not exceed 100 Crores Deduction available as total amt exceeds 100 Crores.Amt of deduction-101x15%=15.15 Crores
III 110 20 130 Deduction in 2013-14 available as amount exceeded 100 Crores.Amt of Deduction=110*15%=16.5 Crores Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-130x15%=19.5 Crores less already claimed 16.5 Crores=3 Crores
IV 110 1 111 Deduction in 2013-14 available as amount exceeded 100 Crores.Amt of Deduction=110*15%=16.5 Crores Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-111x15%=16.65 Crores less already claimed 16.5 Crores=0.15 Crores
V 5 25 30 No deduction as Purchase amt less than 100 Crores No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores
VI 5 26 31 No deduction as Purchase amt less than 100 Crores Deduction available on 26 Crores @15%=3.9 Crores

-ea-

Q2 Compute Admissible  deduction u/s 32 AC

Company Name

2013-14

(AY 2014-15)

2014-15

(AY 2015-16)

A 80 22
B 70 25
C 60 30
D 75 25
E 105 15
F 70 30
G 70 40

 

-a-

Company Name 2013-14 (AY 2014-15) 2014-15 (AY 2015-16) Deduction in 2013-14 TOTAL PUR OF BOTH YEARS Deduction in 2014-15 Explanation 2013-14 Explanation 2014-15
A 80 22 0 102 15.3 No deduction in 2013-14 as amount does not exceed 100 Crores Deduction available as total amt exceeds 100 Crores of both years combned,.Amt of deduction-102x15%=15.3 Crores less already claimed 0 =15.3 Crores Crores
B 70 25 0 95 0 No deduction in 2013-14 as amount does not exceed 100 Crores No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores
C 60 30 0 90 4.5 No deduction in 2013-14 as amount does not exceed 100 Crores No deduction on whole 90 Crores as it does not exceeds 100 Crores of both years combned, However deduction of 30 Crores  as it is more than 25 Crores Amt of deduction-30x15%=4.5 Crores
D 75 25 0 100 0 No deduction in 2013-14 as amount does not exceed 100 Crores No deduction as total amt in 2013-14 and 2014-15 does not exceed 100 Crores,as well as individual amount in 2014-15 is not more than 25 Crores
E 105 15 15.75 120 2.25 Deduction Available=105*15%=15.75 Crores Deduction available as total amt exceeds 100 Crores of both years combined,.Amt of deduction-120x15%=18 Crores less already claimed 15.75 Crores=2.25 Crores
F 70 30 0 100 4.5 No deduction in 2013-14 as amount does not exceed 100 Crores No deduction on whole 90 Crores as it does not exceeds 100 Crores of both years combned, However deduction of 30 Crores  as it is more than 25 Crores Amt of deduction-30x15%=4.5 Crores
G 70 40 0 110 16.5 No deduction in 2013-14 as amount does not exceed 100 Crores Deduction available as total amt exceeds 100 Crores of both years combned,.Amt of deduction-110x15%=16.5 Crores less already claimed 0 Crores=16.5 Crores

-ea-

 Q3

Particulars Amt (in Crores)
Income 90
Expenses 40
Profit 50

Suppose Expenses Include Dep on Machine charged  of 4 Crores as per Companied Act (New Machine Purchased for 40 Crores on 10 April,Dep @ 10%=4 Crores

 

-a-

Indirect Method Amount in Crores
Profit 50
Add  
Expense disallowed  
Dep as per Companied Act 4
   
Less  
Expense Allowed  
Dep as per Income Tax 6
(15%*40)  
Additional Depreciation 8
(20%*40)  
Investment Allowance 6
(15%*40)  
   
PGBP Income 34

-ea-

  1. Income Tax
  2. PGBP Income
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CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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