Section 32AC of ITA, 1961 : Section 32Ac: Investment In New Plant Or Machinery

Explanation using Example

Imagine a company named "ABC Manufacturing Pvt. Ltd." that specializes in producing electronic components. It decides to expand its production capacity and acquires new machinery worth 150 crore rupees on December 15, 2013. Since this investment exceeds the threshold of 100 crore rupees and the machinery is acquired and installed before April 1, 2014, ABC Manufacturing is eligible to claim a deduction under Section 32AC(1)(a) of the Income-tax Act, 1961.

For the assessment year 2014-15, ABC Manufacturing can claim a deduction of 15% on the actual cost of the new machinery, which amounts to 22.5 crore rupees (15% of 150 crore rupees). This deduction will reduce the taxable income of the company for that assessment year, leading to tax savings and providing an incentive for the company to invest in new assets for its manufacturing business.