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Defination of plant and machinery for SSI

08 July 2011

What is the defination of plant and machinery for a SSI unit? Whether the word plant and machinery includes laboratory equipment for a pharmaceutical company which is used for the purpose of testing raw material and finished products. Whether the value of laboratory equipment will be included in the value of1 crore specified for qualifying as a SSI unit?

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4 Replies

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 08 July 2011

ssi limitation of plant and machinery for which department,? as 1 cr ceiling is nowhere , department to department it valries

https://msmediallahabad.gov.in/ssiunitstart.htm

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Riddhi Mehta (CA) (26 Points)
Replied 09 July 2011

As I have stated the assessee is a mfg pharmaceutical company. The investment in plant and machinery was Rs 3 crore earlier and then reduced to Rs1 crore. Below is the brief detail of the notification reducing the limit for investment in plant and mahcinery for quallifying as a SSI:

Vide Order No. S.O. 1288 (E) dt. 24.12.1999, investment limit in respect of SSI units has been reduced from Rs. three crores to Rs. one crore. However, in respect of certain specified items under hosiery and hand tools, the limit shall be Rs. 5 cores, vide Notification No. S.O. 1013(E), dated 9.10.2001. In connection with reduction in limit following clarifications have been issued:

(A) Clarification regarding Reduction in the Investment limit on SSI/ancillary undertakings

In fulfilment of the aspirations of individual SSI units and SSI associations, Government have decided to reduce the investment limit on plant and machinery in respect of SSI/ancillary industrial undertakings from Rs. 3 crore to Rs. 1 crore. This decision has been notified vide Order No. S.O. 1288(E), dated 24th December, 1999.

Subsequently, there have been many queries from the individual entrepreneurs, SSI units, State Governments etc. seeking clarifications on the status of SSI units set up prior to the issue of order dated the 24th December, 1999. The matter has been carefully considered and the position is clarified as under :

(i) units that have obtained permanent registration based on the order dated 10th December, 1997 would continue to remain as SSI units, in spite of the order dated 24th December, 1999, reducing the investment limit to Rs. 1 crore;

(ii) units which had switched over to the SSI status based on the order dated 10th December, 1997 would continue to remain as SSI units, in spite of the order dated 24th December, 1999; and

(iii) units which have got provisional registration with the State authorities for their SSI status would continue to remain as SSI units in spite of the order dated 24th December, 1999, provided the provisional registration had taken place within the period of limitation of 180 days specified in the order dated 10th December, 1997.

Assessee has claimed deduction u/s 80IB on the basis of SSI since the investment in plant and machinery was less then Rs 1 crore, However, this investment does not include value of laboratory equipment. If it is added the value exceeds Rs 1 crore and thus disallowance has been made u/s 80IB.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 09 July 2011

Note 2: (a) In calculating the value of plant and machinery for the purposes of paragraphs (1) and (2) of this notification, the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account.

(b) In calculating the value of plant and machinery, the following shall be excluded, namely:

(i) the cost of equipment’s such as tools, jigs, dies, moulds, and spare parts for maintenance and the cost of consumable stores;

(ii) the cost of installation of plant and machinery;

(iii) the cost of research and development equipment and pollution control equipment;

(iv) the cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board;

(v) the bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;

(vi) the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted or individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures.,

(vii) the cost of gas producer plants;

(viii) transportation charges (excluding of sales‑tax and excise) for indigenous machinery from the place of manufacturing to the site of the factory;

(ix) charges paid for technical know‑how for erection of plant and machinery;

(x) cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process; and

(xi) cost of fire fighting equipment.

(i) import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);

(ii) the shipping charges;

(iii) customs clearance charges; and

(iv) sales tax.

Riddhi Mehta (CA) (26 Points)
Replied 16 July 2011

Does Research and development equipment include Laboratory equipment? For a pharma company Lab equipments are used for manufacturing or testing. R&D equipments are all together classified differently.