Section 32AC — Investment in new plant or machinery

Chapter IV-D — Profits and Gains of Business or ProfessionITA 1961Up to AY 2026-27

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

32AC. Investment in new plant or machinery. [LEGACY — Operative AY 2014-15 / 2015-16 (under sub-section (1)) and AY 2015-16 / 2016-17 / 2017-18 (under sub-section (1A)); sunset for AYs from 1-4-2018 per sub-section (1B).]

(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,—

(a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees ; and

(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a).

(1A) [Inserted by the Finance Act, 2014.] Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets acquired during any previous year exceeds twenty-five crore rupees and such assets are installed on or before the 31st day of March, 2017, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new assets for the assessment year relevant to that previous year :

Provided that where the installation of the new assets is in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new assets are installed :

Provided further that no deduction under this sub-section shall be allowed for the assessment year commencing on the 1st day of April, 2015 to the assessee, which is eligible to claim deduction under sub-section (1) for the said assessment year.

(1B) No deduction under sub-section (1A) shall be allowed for any assessment year commencing on or after the 1st day of April, 2018.

[Verbatim text — Section 32AC inserted by the Finance Act, 2013, w.e.f. 1-4-2014; sub-section (1A) inserted by Finance Act 2014; sub-section (1B) sunset clause inserted to disallow the deduction from AY 2018-19. The 15% investment allowance was available alongside the 20%/35% Additional Depreciation under s. 32(1)(iia) — together yielding combined 35%/50% upfront capital incentive. Section remains on the statute book for legacy proceedings only. Cross-checked against ITD bare-Act publications.]

Function in the statutory architecture

Section 32AC gave a company engaged in manufacture or production of any article or thing a deduction of fifteen per cent of the actual cost of new assets. Under sub-section (1), it applied where new assets acquired and installed after 31-3-2013 but before 1-4-2015 cost more than Rs 100 crore in aggregate, for AY 2014-15 and AY 2015-16. Under sub-section (1A), it applied where new assets acquired in a previous year cost more than Rs 25 crore and were installed on or before 31-3-2017; the deduction was allowed in the year of installation.

“New asset” means new plant or machinery other than a ship or aircraft. It excludes plant used before by any other person, plant in office or residential premises, office appliances including computers or software, vehicles, and plant whose whole cost is deducted in one year.

Operative consequences

If a new asset is sold or transferred within five years from installation, except in an amalgamation or demerger, the deduction is deemed business income of the year of transfer, in addition to any gain on the transfer (sub-section (2)).
In an amalgamation or demerger, the same rule binds the amalgamated or resulting company (sub-section (3)).
A company eligible under sub-section (1) for AY 2015-16 could not also claim under sub-section (1A) for that year.

Status

The section is not operative for AY 2026-27. Sub-section (1B) provides that no deduction under sub-section (1A) “shall be allowed for any assessment year commencing on or after the 1st day of April, 2018”, and sub-section (1) covered only AY 2014-15 and AY 2015-16. 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.

Case law on Section 32AC

ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.

Section 32AC case laws

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 32AC(1), (1A) — deduction of 15 per cent of actual cost of new plant or machinery by manufacturing companies	No corresponding provision in the Income-tax Act, 2025
s. 32AC(2), (3) — withdrawal on transfer within five years	No corresponding provision in the Income-tax Act, 2025