allowance of balance 50% additional depreciation

Salient features of Union Budget 2015 

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.

Deduction for employment of new workmen in factory

The existing provisions contained in section 80JJAA of the Income-Tax Act 1961, inter alia, provide for deduction to an Indian company, deriving profits from manufacture of goods in a factory. The quantum of deduction allowed is equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

Clause (a) of sub-section (2), inter alia, provides that no deduction under sub-section (1) shall be available if the factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company. Explanation to the section defines “Additional wages” to mean the wages paid to the new regular workmen in excess of hundred workmen employed during the previous year.

With a view to encourage generation of employment, it is proposed to amend the section so as to extend the benefit to all assessees having manufacturing units rather than restricting it to corporate assessees only. Further, in order to enable the smaller units to claim this incentive, it is proposed to extend the benefit under the section to units employing even 50 instead of 100 regular workmen.
Accordingly, it is proposed to amend sub-section (1) of the aforesaid section. It is also proposed to amend clause (i) of the Explanation so as to provide “additional wages” to mean the wages paid to the new regular workmen in excess of fifty workmen employed during the previous year.

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

Section 269SS of Income Tax Act - no cash transactions above Rs.20,000/-

1) section 269SS of the Income-Tax Act is being amended to provide that no cash transactions in the purchase of immoveable property is allowed. In case anybody violates this provision then penalties as provided in sections 271D and 271E will be attracted.

The amendment to section 269SS provides that no person shall accept any advance or repayment of an advance in cash exceeding Rs.20,000/-. So the onus on complying with this provision is on the person accepting the cash which is usually the builder or developer or seller of the flat in the case of immovable property.

This is a welcome move to curb black money in the real estate sector and one hopes that persons duly comply with the new rules.