Section 32A allowed an investment allowance of twenty-five per cent (twenty per cent for assets under sub-section (8B)) of the actual cost of a new ship or new aircraft acquired, or new machinery or plant installed, after 31-3-1976, which was owned by the assessee and wholly used for its business. Eligible machinery or plant included plant for generation or distribution of power, plant in a small-scale industrial undertaking, and plant in other industrial undertakings not making articles listed in the Eleventh Schedule. Office appliances, road transport vehicles, plant in office or residential premises and assets qualifying for development rebate were excluded.
If total income was too small, the unabsorbed allowance was carried forward for not more than eight assessment years. An amount equal to seventy-five per cent of the allowance (fifty per cent for a ship) had to be credited to an Investment Allowance Reserve Account, to be used within ten years for acquiring new assets and meanwhile for the business.
Operative consequences
The allowance was deemed wrongly made if the asset was transferred within eight years, or the reserve was not used for new assets within ten years or was used for dividends, remittance abroad or non-business purposes; s. 155(4A) then applied.
Transfers to Government bodies and certain amalgamations or successions were excepted.
Where s. 32A was allowed in an assessment year, no s. 32AB deduction was allowed for that year and the four following years (sub-section (8C)).
Status
The section remains in the 1961 Act but is spent in substance. Its eligibility windows run from 1976 to 1988, and assets acquired or installed after 31-3-1988 qualify only before a date the Central Government may notify under sub-section (8B)(b). Sub-section (9) reads “[Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]”. The Finance Act, 2026 does not amend this section.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject there is no provision in the Income-tax Act, 2025.
Function in the statutory architecture
Section 32A allowed an investment allowance of twenty-five per cent (twenty per cent for assets under sub-section (8B)) of the actual cost of a new ship or new aircraft acquired, or new machinery or plant installed, after 31-3-1976, which was owned by the assessee and wholly used for its business. Eligible machinery or plant included plant for generation or distribution of power, plant in a small-scale industrial undertaking, and plant in other industrial undertakings not making articles listed in the Eleventh Schedule. Office appliances, road transport vehicles, plant in office or residential premises and assets qualifying for development rebate were excluded.
If total income was too small, the unabsorbed allowance was carried forward for not more than eight assessment years. An amount equal to seventy-five per cent of the allowance (fifty per cent for a ship) had to be credited to an Investment Allowance Reserve Account, to be used within ten years for acquiring new assets and meanwhile for the business.
Operative consequences
Status
The section remains in the 1961 Act but is spent in substance. Its eligibility windows run from 1976 to 1988, and assets acquired or installed after 31-3-1988 qualify only before a date the Central Government may notify under sub-section (8B)(b). Sub-section (9) reads “[Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]”. The Finance Act, 2026 does not amend this section.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject there is no provision in the Income-tax Act, 2025.