Depreciation
This query is : Resolved
16 March 2016
Will Additional depreciation be allowed to a manufacturer in food industry on Solar Plant installed in its factory premises.?
16 March 2016
If part of P&M then Yes
17 March 2016
How will that classify for Plant & Machinery.?
21 July 2024
Yes, additional depreciation can be allowed to a manufacturer in the food industry for a Solar Plant installed in its factory premises under certain conditions. Here’s how it would classify and the criteria for claiming additional depreciation:
### Classification of Solar Plant as Plant & Machinery
1. **Definition under Schedule II of Companies Act, 2013:**
- Plant & Machinery includes assets used for manufacturing, processing, etc., including renewable energy devices like solar power plants.
- Solar plants are typically classified under the category of "Renewable Energy Devices" or "Specialized Equipment" within the broader classification of Plant & Machinery.
2. **Specific Classification:**
- A solar plant installed for generating electricity within the factory premises would fall under the category of Plant & Machinery.
- This classification is based on its use in the manufacturing process or in supporting operations.
### Additional Depreciation Eligibility
1. **Criteria for Claiming Additional Depreciation:**
- The Income Tax Act, 1961 allows for an additional depreciation deduction of 20% of the actual cost of new machinery or plant (other than ships and aircraft) acquired and installed after 31st March 2005.
- To claim additional depreciation, the solar plant must:
- Be new and acquired and installed after the specified date.
- Be used for the purpose of business or profession, which includes manufacturing activities in the case of a manufacturer in the food industry.
- Be eligible as per the definitions and conditions laid out in the Income Tax Act.
2. **Impact on Taxation:**
- Additional depreciation is allowed over and above normal depreciation.
- It helps in reducing taxable income, thereby lowering the tax liability of the company.
### Conclusion
In summary, a solar plant installed in the factory premises of a manufacturer in the food industry would classify as Plant & Machinery. The company can claim additional depreciation on this solar plant provided it meets the criteria set forth under the Income Tax Act, 1961. It’s advisable to consult with a tax advisor or chartered accountant to ensure compliance with all relevant tax laws and regulations and to accurately calculate and claim depreciation benefits.
### Classification of Solar Plant as Plant & Machinery
1. **Definition under Schedule II of Companies Act, 2013:**
- Plant & Machinery includes assets used for manufacturing, processing, etc., including renewable energy devices like solar power plants.
- Solar plants are typically classified under the category of "Renewable Energy Devices" or "Specialized Equipment" within the broader classification of Plant & Machinery.
2. **Specific Classification:**
- A solar plant installed for generating electricity within the factory premises would fall under the category of Plant & Machinery.
- This classification is based on its use in the manufacturing process or in supporting operations.
### Additional Depreciation Eligibility
1. **Criteria for Claiming Additional Depreciation:**
- The Income Tax Act, 1961 allows for an additional depreciation deduction of 20% of the actual cost of new machinery or plant (other than ships and aircraft) acquired and installed after 31st March 2005.
- To claim additional depreciation, the solar plant must:
- Be new and acquired and installed after the specified date.
- Be used for the purpose of business or profession, which includes manufacturing activities in the case of a manufacturer in the food industry.
- Be eligible as per the definitions and conditions laid out in the Income Tax Act.
2. **Impact on Taxation:**
- Additional depreciation is allowed over and above normal depreciation.
- It helps in reducing taxable income, thereby lowering the tax liability of the company.
### Conclusion
In summary, a solar plant installed in the factory premises of a manufacturer in the food industry would classify as Plant & Machinery. The company can claim additional depreciation on this solar plant provided it meets the criteria set forth under the Income Tax Act, 1961. It’s advisable to consult with a tax advisor or chartered accountant to ensure compliance with all relevant tax laws and regulations and to accurately calculate and claim depreciation benefits.
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