In order to encourage substantial investment in plant or machinery, the Finance Act, 2013 had inserted a section 32AC in the Income-tax Act to provide that where an assessee, being a company,—
(a) is engaged in the business of manufacture of an article or thing; and
(b) acquires and installs new assets (eligible plant or machinery) during the period beginning from 01.04.2013 and ending on 31.03.2015 and the aggregate amount of actual cost of such new assets exceeds `100 crores, then, such company shall be allowed—
(i) for the assessment year 2014-15, a deduction of 15% of aggregate amount of actual cost of new assets acquired and installed during the financial year 2013-14, if the aggregate amount of actual cost of such assets exceeds `100 crore;
(ii) for the assessment year 2015-16, a deduction of 15% of aggregate amount of actual cost of new assets, acquired and installed during the period beginning on 01.04.2013 and ending on 31.3.2015, as reduced by the deduction allowed, if any, for assessment year 2014-15.
In order to simplify the existing provisions of section 32AC and also to make medium size investments in plant and machinery eligible for deduction, the Finance (No. 2) Act, 2014 has w.e.f. A.Y. 2015-16 inserted sub-section (1A), to provide that the deduction under section 32AC shall be allowed if the company on or after 01-04-2014 acquires and installs eligible plant and machinery during any previous year, the aggregate amount of actual cost of which exceeds `25 crore.
A proviso to section 32AC(1A) has also been inserted to provide that the assessee who is eligible to claim deduction under the existing combined threshold limit of `100 crore for investment made in previous years 2013-14 and 2014-15 shall continue to be eligible to claim deduction under the existing provisions contained in section 32AC(1) even if its investment in the previous year 2014-15 is below the new threshold limit of investment of `25 crore during the previous year.
Further, the Act has inserted section 32AC(1B) to provide that no deduction under section 32AC(1A) shall be allowed for any assessment year commencing on or after the 1st day of April, 2018.
In other words, the eligible plant & machinery should be acquired and installed upto 31-3-2017 to claim exemption under section 32AC( 1A).
The other conditions of section 32AC shall also be applicable to the newly inserted section 32AC(1A).