Finance Bill 2013 - Deductions Available to Industry

1. Finance Bill 2013 - Deductions Available to Industry Gautam Nayak Contractor, Nayak & Kishnadwala 21st March 2013

2. Investment Allowance – s.32AC • Available to companies engaged in manufacture/ production of articles/things • Deduction of 15% of new plant & machinery acquired & installed from 1st April 2013 to 31st March 2015 • Available only if aggregate cost of new P & M exceeds Rs 100 crore • No transfer or sale of new P & M for 5 years – proportionate withdrawal in year of transfer • Amalgamation/Demerger not regarded as transfer - amalgamated/resulting co to hold for remaining period • No need to create reserve CNK

3. Investment Allowance – s.32AC • Eligible Entities • Only companies – not partnerships/LLPs • Service cos, infrastructure cos, construction cos will not qualify • Mining cos eligible • Power generation cos may qualify • Software product cos will get benefit • Cos doing job work may qualify if process results in commercially different article or thing • No list of prohibited articles or things CNK

4. Investment Allowance – s.32AC • Deduction • If limit not crossed in AY 2014-15, but in AY 2015-16, entire deduction in AY 2015-16 • In addition to depreciation & additional depreciation • Part of business deductions – no separate carry forward, carry forward as part of business loss • Deduction available only if business commenced – new business where profits & gains not computed would not get deduction • No deduction for MAT – no book entry CNK

5. Investment Allowance – s.32AC • New P & M • To exclude vehicles, ship, aircraft, office appliances (including computers & software), secondhand P & M, machinery installed in offices /residential accommodation/guest house, 100% cost deductible assets • Not necessary that used for manufacture/production • Secondhand used outside India not eligible • Computers & software which are part of production plant or machinery would be eligible • Dumpers, Tippers not vehicles if used in production process • Assets given on lease – whether eligible? • Cost to include interest – expln 8 to s.43(1) CNK

6. Investment Allowance – s.32AC • Acquired & Installed • Both acqn & installn to be within eligible period • Not acqn > 100cr + Installn > 100 cr – assets acqd & installed during period to exceed Rs 100 crore • No requirement of put to use • If acqd & installed in time, but business commenced after 31.3.2015, no deduction • Self constructed asset – whether acqd? • Acquisition on finance lease – whether eligible? • Installn – placing in position for use – not necessarily affixing to earth or premises • Where installn over period of time, date of compltn of installn • Even if electric connection pending, amts to installn CNK

7. New Workmen Dedn – s.80JJAA • 30% of wages paid to new additional regular employees exceeding 100 if increase of at least 10% over earlier year • For 3 assessment years • Earlier available to industrial undertaking engaged in manufacture/ production of new article/thing • Software company eligible – Texas Instruments 115 TTJ (Bang) 976 • Now restricted to employees employed in factory mfg goods • Software, mining cos would not be eligible • What if eligible for first year in AY 2013-14? • Now not available where factory hived off/transferred from another entity/acqd by amalgamation • What if transfer/amalgn prior to amendment? CNK

8. Keyman insurance policies • Sums received under Keyman Insurance Policy taxable u/s.2(24)(xi) rws 17(3)(ii), 28(vi), and 56(2)(iv) • Exception for Keyman insurance Policy u/s.10(10D) – not exempt as life insurance policy • Rajan Nanda – 349 ITR 8 (Del) – ceases to be Keyman Insurance Policy on assignment to keyman – therefore exempt u/s.10(10D) • Amndt – Keyman Insurance Policy will continue to remain Keyman Insurance Policy even after assignment CNK