32A. Investment allowance.- (1) In respect of a ship
or an aircraft or machinery or plant specified in sub-section
(2), which is owned by the assessee and is wholly used for
the purposes of the business carried on by him, there shall,
in accordance with and subject to the provisions of this section,
be allowed a deduction, in respect of the previous year in
which the ship or aircraft was acquired or the machinery or
plant was installed or, if the ship, aircraft, machinery or
plant is first put to use in the immediately succeeding previous
year, then, in respect of that previous year, of a sum by
way of investment allowance equal to twenty-five per cent
of the actual cost of the ship, aircraft, machinery or plant
to the assessee :
Provided that in respect of a ship or an aircraft or machinery
or plant specified in sub-section (8B), this sub-section shall
have effect as if for the words “twenty-five per cent”,
the words “twenty per cent” had been substituted
:
Provided further that no deduction shall be allowed under
this section in respect of—
(a) any machinery or plant installed in any office premises
or any residential accommodation, including any accommodation
in the nature of a guest house ;
(b) any office appliances or road transport vehicles ;
(c) any ship, machinery or plant in respect of which the
deduction by way of development rebate is allowable under
section 33 ; and
(d) any machinery or plant, the whole of the actual cost
of which is allowed as a deduction (whether by way of depreciation
or otherwise) in computing the income chargeable under the
head “Profits and gains of business or profession”
of any one previous year.
Explanation.—For the purposes of this sub-section,
“actual cost” means the actual cost of the ship,
aircraft, machinery or plant to the assessee as reduced by
that part of such cost which has been met out of the amount
released to the assessee under sub-section (6) of section
32AB.
(2) The ship or aircraft or machinery or plant referred to
in sub-section (1) shall be the following, namely :—
(a) a new ship or new aircraft acquired after the 31st day
of March, 1976, by an assessee engaged in the business of
operation of ships or aircraft ;
(b) any new machinery or plant installed after the 31st
day of March, 1976,—
(i) for the purposes of business of generation or distribution
of electricity or any other form of power ; or
(ii) in a small-scale industrial undertaking for the purposes
of business of manufacture or production of any article or
thing ; or
(iii) in any other industrial undertaking for the purposes
of business of construction, manufacture or production of
any article or thing , not being an article or thing specified
in the list in the Eleventh Schedule :
Provided that nothing contained in clauses (a) and (b) shall
apply in relation to,—
(i) a new ship or new aircraft acquired, or
(ii) any new machinery or plant installed,
after the 31st day of March, 1987 but before the 1st day of
April, 1988, unless such ship or aircraft is acquired or such
machinery or plant is installed in the circumstances specified
in clause (a) of sub-section (8B) and the assessee furnishes
evidence to the satisfaction of the Assessing Officer as specified
in that clause ;
(c) any new machinery or plant installed after the 31st day
of March, 1983, but before the 1st day of April, 1987, for
the purposes of business of repairs to ocean-going vessels
or other powered craft if the business is carried on by an
Indian company and the business so carried on is for the time
being approved for the purposes of this clause by the Central
Government.
Explanation.—For the purposes of this sub-section and
sub-sections (2B) , (2C) and (4),—
(1)(a) “new ship” or “new aircraft”
includes a ship or aircraft which before the date of acquisition
by the assessee was used by any other person, if it was not
at any time previous to the date of such acquisition owned
by any person resident in India ;
(b) “new machinery or plant” includes machinery
or plant which before its installation by the assessee was
used outside India by any other person, if the following conditions
are fulfilled, namely :—
(i) such machinery or plant was not, at any time previous
to the date of such installation by the assessee, used in
India ;
(ii) such machinery or plant is imported into India from
any country outside India ; and
(iii) no deduction on account of depreciation in respect
of such machinery or plant has been allowed or is allowable
under the provisions of the Indian Income-tax Act, 1922 (11
of 1922), or this Act in computing the total income of any
person for any period prior to the date of the installation
of the machinery or plant by the assessee,
(2) an industrial undertaking shall be deemed to be a small-scale
industrial undertaking, if the aggregate value of the machinery
and plant (other than tools, jigs, dies and moulds) installed,
as on the last day of the previous year, for the purposes
of the business of the undertaking does not exceed,—
(i) in a case where the previous year ends before the 1st
day of August, 1980, ten lakh rupees ;
(ii) in a case where the previous year ends after the 31st
day of July, 1980, but before the 18th day of March, 1985,
twenty lakh rupees; and
(iii) in a case where the previous year ends after the 17th
day of March, 1985, thirty-five lakh rupees,
and for this purpose the value of any machinery or plant shall
be,—
(a) in the case of any machinery or plant owned by the assessee,
the actual cost thereof to the assessee ; and
(b) in the case of any machinery or plant hired by the assessee,
the actual cost thereof as in the case of the owner of such
machinery or plant.
(2A) The deduction under sub-section (1) shall not be denied
in respect of any machinery or plant installed and used mainly
for the purposes of business of construction, manufacture
or production of any article or thing, not being an article
or thing specified in the list in the Eleventh Schedule, by
reason only that such machinery or plant is also used for
the purposes of business of construction, manufacture or production
of any article or thing specified in the said list.
(2B) Where any new machinery or plant is installed after
the 30th day of June, 1977, but before the 1st day of April,
1987, for the purposes of business of manufacture or production
of any article or thing and such article or thing—
(a) is manufactured or produced by using any technology
(including any process) or other know-how developed in, or
(b) is an article or thing invented in,
a laboratory owned or financed by the Government, or a laboratory
owned by a public sector company or a University or by an
institution recognised in this behalf by the prescribed authority,
the provisions of sub-section (1) shall have effect in relation
to such machinery or plant as if for the words “twenty-five
per cent”, the words “thirty-five per cent”
had been substituted, if the following conditions are fulfilled,
namely :—
(i) the right to use such technology (including any process)
or other know-how or to manufacture or produce such article
or thing has been acquired from the owner of such laboratory
or any person deriving title from such owner ;
(ii) the assessee furnishes, along with his return of income
for the assessment year for which the deduction is claimed,
a certificate from the prescribed authority to the effect
that such article or thing is manufactured or produced by
using such technology (including any process) or other know-how
developed in such laboratory or is an article or thing invented
in such laboratory ; and
(iii) the machinery or plant is not used for the purpose
of business of manufacture or production of any article or
thing specified in the list in the Eleventh Schedule.
Explanation.—For the purposes of this sub-section,—
(a) “laboratory financed by the Government”
means a laboratory owned by any body including a society registered
under the Societies Registration Act, 1860 (21 of 1860) and
financed wholly or mainly by the Government;
(b) Omitted
(c) “University” means a University established
or incorporated by or under a Central, State or Provincial
Act and includes an institution declared under section 3 of
the University Grants Commission Act, 1956 (3 of 1956) to
be a University for the purposes of that Act.
(2C) Where any new machinery or plant, being machinery or
plant which would assist in control of pollution or protection
of environment and which has been notified in this behalf
by the Central Government in the Official Gazette, is installed
after the 31st day of May, 1983 but before the 1st day of
April, 1987, in any industrial undertaking referred to in
sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause
(b) of sub-section (2), the provisions of sub- section (1)
shall have effect in relation to such machinery or plant as
if for the words “twenty-five per cent”, the words
“thirty-five per cent” had been substituted.
(3) Where the total income of the assessee assessable for
the assessment year relevant to the previous year in which
the ship or aircraft was acquired or the machinery or plant
was installed, or, as the case may be, the immediately succeeding
previous year (the total income for this purpose being computed
after deduction of the allowances under section 33 and section
33A, but without making any deduction under sub-section (1)
of this section or any deduction under Chapter VI-A) is nil
or is less than the full amount of the investment allowance,—
(i) the sum to be allowed by way of investment allowance
for that assessment year under sub-section (1) shall be only
such amount as is sufficient to reduce the said total income
to nil ; and
(ii) the amount of the investment allowance, to the extent
to which it has not been allowed as aforesaid, shall be carried
forward to the following assessment year, and the investment
allowance to be allowed for the following assessment year
shall be such amount as is sufficient to reduce the total
income of the assessee assessable for that assessment year,
computed in the manner aforesaid, to nil, and the balance
of the investment allowance, if any, still outstanding shall
be carried forward to the following assessment year and so
on, so, however, that no portion of the investment allowance
shall be carried forward for more than eight assessment years
immediately succeeding the assessment year relevant to the
previous year in which the ship or aircraft was acquired or
the machinery or plant was installed or, as the case may be,
the immediately succeeding previous year.
Explanation.—Where for any assessment year, investment
allowance is to be allowed in accordance with the provisions
of this sub-section in respect of any ship or aircraft acquired
or any machinery or plant installed in more than one previous
year, and the total income of the assessee assessable for
that assessment year (the total income for this purpose being
computed after deduction of the allowances under section 33
and section 33A, but without making any deduction under sub-section
(1) of this section or any deduction under Chapter VI-A) is
less than the aggregate of the amounts due to be allowed in
respect of the assets aforesaid for that assessment year,
the following procedure shall be followed, namely :—
(a) the allowance under clause (ii) shall be made before
any allowance under clause (i) is made; and
(b) where an allowance has to be made under clause (ii)
in respect of amounts carried forward from more than one assessment
year, the amount carried forward from an earlier assessment
year shall be allowed before any amount carried forward from
a later assessment year.
(4) The deduction under sub-section (1) shall be allowed
only if the following conditions are fulfilled, namely :—
(i) the particulars prescribed in this behalf have been
furnished by the assessee in respect of the ship or aircraft
or machinery or plant;
(ii) an amount equal to seventy-five per cent of the investment
allowance to be actually allowed is debited to the profit
and loss account of any previous year in respect of which
the deduction is to be allowed under sub-section (3) or any
earlier previous year (being a previous year not earlier than
the year in which the ship or aircraft was acquired or the
machinery or plant was installed or the ship, aircraft, machinery
or plant was first put to use) and credited to a reserve account
(to be called the “Investment Allowance Reserve Account”)
to be utilised—
(a) for the purposes of acquiring, before the expiry of
a period of ten years next following the previous year in
which the ship or aircraft was acquired or the machinery or
plant was installed, a new ship or a new aircraft or new machinery
or plant [other than machinery or plant of the nature referred
to in clauses (a), (b) and (d) of the second proviso to sub-section
(1) for the purposes of the business of the undertaking; and
(b) until the acquisition of a new ship or a new aircraft
or new machinery or plant as aforesaid, for the purposes of
the business of the undertaking other than for distribution
by way of dividends or profits or for remittance outside India
as profits or for the creation of any asset outside India:
Provided that this clause shall have effect in respect of
a ship as if for the word “seventy-five”, the
word “fifty” had been substituted.
Explanation.—Where the amount debited to the profit
and loss account and credited to the Investment Allowance
Reserve Account under this sub-section is not less than the
amount required to be so credited on the basis of the amount
of deduction in respect of investment allowance claimed in
the return made by the assessee under section 139, but a higher
deduction in respect of the investment allowance is admissible
on the basis of the total income as proposed to be computed
by the Assessing Officer under section 143, the Assessing
Officer shall, by notice in writing in this behalf, allow
the assessee an opportunity to credit within the time specified
in the notice or within such further time as the Assessing
Officer may allow, a further amount to the Investment Allowance
Reserve Account out of the profits and gains of the previous
year in which such notice is served on the assessee or of
the immediately preceding previous year, if the accounts for
that year have not been made up; and, if the assessee credits
any further amount to such account within the time aforesaid,
the amount so credited shall be deemed to have been credited
to the Investment Allowance Reserve Account of the previous
year in which the deduction is admissible and such amount
shall not be taken into account in determining the adequacy
of the reserve required to be created by the assessee in respect
of the previous year in which such further credit is made:
Provided that such opportunity shall not be allowed by the
Assessing Officer in a case where the difference in the total
income as proposed to be computed by him and the total income
as returned by the assessee arises out of the application
of the proviso to sub-section (1) of section 145 or sub-section
(2) of that section or the omission by the assessee to disclose
his income fully and truly.
(5) Any allowance made under this section in respect of any
ship, aircraft, machinery or plant shall be deemed to have
been wrongly made for the purposes of this Act—
(a) if the ship, aircraft, machinery or plant is sold or
otherwise transferred by the assessee to any person at any
time before the expiry of eight years from the end of the
previous year in which it was acquired or installed; or
(b) if at any time before the expiry of ten years from the
end of the previous year in which the ship or aircraft was
acquired or the machinery or plant was installed, the assessee
does not utilise the amount credited to the reserve account
under sub-section (4) for the purposes of acquiring a new
ship or a new aircraft or new machinery or plant [other than
machinery or plant of the nature referred to in clauses (a),
(b) and (d) of the second proviso to sub-section (1) for the
purposes of the business of the undertaking; or
(c) if at any time before the expiry of the ten years aforesaid,
the assessee utilises the amount credited to the reserve account
under sub-section (4) for distribution by way of dividends
or profits or for remittance outside India as profits or for
the creation of any assets outside India or for any other
purpose which is not a purpose of the business of the undertaking,
and the provisions of sub-section (4A) of section 155 shall
apply accordingly:
Provided that nothing in clause (a) shall apply—
(i) where the ship, aircraft, machinery or plant is sold
or otherwise transferred by the assessee to the Government,
a local authority, a corporation established by a Central,
State or Provincial Act or a Government company as defined
in section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) where the sale or transfer of the ship, aircraft, machinery
or plant is made in connection with the amalgamation or succession,
referred to in sub-section (6) or sub-section (7).
(6) Where, in a scheme of amalgamation, the amalgamating
company sells or otherwise transfers to the amalgamated company
any ship, aircraft, machinery or plant, in respect of which
investment allowance has been allowed to the amalgamating
company under sub-section (1),—
(a) the amalgamated company shall continue to fulfil the
conditions mentioned in sub-section (4) in respect of the
reserve created by the amalgamating company and in respect
of the period within which such ship, aircraft, machinery
or plant shall not be sold or otherwise transferred and in
default of any of these conditions, the provisions of sub-section
(4A) of section 155 shall apply to the amalgamated company
as they would have applied to the amalgamating company had
it committed the default; and
(b) the balance of investment allowance, if any, still outstanding
to the amalgamating company in respect of such ship, aircraft,
machinery or plant, shall be allowed to the amalgamated company
in accordance with the provisions of sub-section (3), so,
however, that the total period for which the balance of investment
allowance shall be carried forward in the assessments of the
amalgamating company and the amalgamated company shall not
exceed the period of eight years specified in sub-section
(3) and the amalgamated company shall be treated as the assessee
in respect of such ship, aircraft, machinery or plant for
the purposes of this section.
(7) Where a firm is succeeded to by a company in the business
carried on by it as a result of which the firm sells or otherwise
transfers to the company any ship, aircraft, machinery or
plant, the provisions of clauses (a) and (b) of sub-section
(6) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this sub-section shall
apply only where—
(i) all the property of the firm relating to the business
immediately before the succession becomes the property of
the company;
(ii) all the liabilities of the firm relating to the business
immediately before the succession become the liabilities of
the company; and
(iii) all the shareholders of the company were partners
of the firm immediately before the succession.
(8) The Central Government, if it considers necessary or
expedient so to do, may, by notification in the Official Gazette,
direct that the deduction allowable under this section shall
not be allowed in respect of any ship or aircraft acquired
or any machinery or plant installed after such date as may
be specified therein.
(8A) The Central Government, if it considers necessary or
expedient so to do, may, by notification in the Official Gazette,
omit any article or thing from the list of articles or things
specified in the Eleventh Schedule.
(8B) Notwithstanding anything contained in sub-section (8)
or the notification of the Government of India in the Ministry
of Finance (Department of Revenue) No. GSR 870(E), dated the
12th June, 1986, issued thereunder, the provisions of this
section shall apply in respect of,—
(a) (i) a new ship or new aircraft acquired after the 31st
day of March, 1987 but before the 1st day of April, 1988,
if the assessee furnishes evidence to the satisfaction of
the Assessing Officer that he had, before the 12th day of
June, 1986, entered into a contract for the purchase of such
ship or aircraft with the builder or manu-facturer or owner
thereof, as the case may be;
(ii) any new machinery or plant installed after the 31st
day of March, 1987 but before the 1st day of April, 1988,
if the assessee furnishes evidence to the satisfaction of
the Assessing Officer that before the 12th day of June, 1986,
he had purchased such machinery or plant or had entered into
a contract for the purchase of such machinery or plant with
the manufacturer or owner of, or a dealer in, such machinery
or plant, or had, where such machinery or plant has been manufactured
in an undertaking owned by the assessee, taken steps for the
manufacture of such machinery or plant:
Provided that nothing contained in sub-section (1) shall entitle
the assessee to claim deduction in respect of a ship or aircraft
or machinery or plant referred to in this clause in any previous
year except the previous year relevant to the assessment year
commencing on the 1st day of April, 1989;
(b) a new ship or new aircraft acquired or any new machinery
or plant installed after the 31st day of March, 1988, but
before such date as the Central Government, if it considers
necessary or expedient so to do, may, by notification in the
Official Gazette , specify in this behalf.
(8C) Subject to the provisions of clause (ii) of sub-section
(3), where a deduction has been allowed to an assessee under
sub-section (1) in any assessment year, no deduction shall
be allowed to the assessee under section 32AB in the said
assessment year (hereinafter referred to as the initial assessment
year) and a block of further period of four years beginning
with the assessment year immediately succeeding the initial
assessment year.
(9) [Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]
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