Section 32AC(1B)

Section 32AC(1B) — the law in short

What the courts have decided on section 32AC(1B), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.32AC: the fifteen per cent investment allowance for new plant and machinery — two different windows, two different thresholds, and a five-year lock-in that survives the allowance CBDT Circulars & InstructionsCuts both ways
  A company client has been told it can claim a fifteen per cent investment allowance on new plant. Which years does section 32AC actually cover, what is the investment threshold, and what happens if the plant is sold?
  Section 32AC is a spent provision and its two limbs cover different years on different thresholds. Sub-section (1), inserted by the Finance Act, 2013 with effect from 1 April 2014, applies only to a COMPANY engaged in the business of manufacture or production of any article or thing which acquires AND installs new assets after 31 March 2013 but before 1 April 2015 with an aggregate actual cost exceeding one hundred crore rupees; it gives fifteen per cent for AY 2014-15 on assets acquired and installed after 31 March 2013 but before 1 April 2014, and fifteen per cent for AY 2015-16 on assets acquired and installed after 31 March 2013 but before 1 April 2015, reduced by whatever was allowed for AY 2014-15. Sub-section (1A), inserted by the Finance (No. 2) Act, 2014 with effect from 1 April 2015, lowers the entry price: fifteen per cent where the actual cost of new assets acquired during a previous year exceeds twenty-five crore rupees and those assets are installed on or before 31 March 2017. Sub-section (1B), inserted by the same Act from the same date, kills sub-section (1A) for any assessment year commencing on or after 1 April 2018. So the whole section reaches AY 2014-15 to AY 2017-18 and no further. Whatever is allowed carries a five-year lock-in under sub-section (2): if the new asset is sold or otherwise transferred within five years of the date of INSTALLATION, otherwise than in an amalgamation or demerger, the deduction is deemed to be business income of the year of transfer, "in addition to taxability of gains, arising on account of transfer of such new asset".

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.