 "RIL, Tata Steel, Adani to gain from investment allowance rejig")
Reliance Industries, Tata Steel and the Adani group will be the biggest beneficiaries of the 15 per cent investment allowance which comes into effect with retrospective effect from April 1, 2015.
The Income Tax Act specifies that manufacturing companies can avail of the allowance on investments made in new assets exceeding Rs 25 crore so long as their acquisition and installation occur in the same year.
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The Finance Bill, 2016, proposes to do away with the requirement that the asset be acquired and installed in the same year.
The clarification in this week’s Budget came after the income tax department refused to provide the incentive to companies because assets were bought and installed in different years.
The Budget proposes to allow companies to avail the allowance so long as the assets are installed on or before March 31, 2017, irrespective of their acquisition date.
“The introduction of the grace period for installation signifies that the government is in sync with ground issues faced by the manufacturing sector,” said Daksha Baxi, executive director of Khaitan & Co, a corporate law firm. This would benefit infrastructure companies because large items of machinery took a long time to install, she said.
Reliance Industries has invested Rs 3.12 lakh crore over the last few few years and expects the entire downstream expansion to be completed by the first quarter of 2016-17. Reliance Industries is also investing over Rs 1 lakh crore in a wireless telephony network to be launched nationwide by the middle of 2016.
Tata Steel has invested Rs 25,000 crore in new steel-making capacity in Kalinganagar, Odisha. The plant has a capacity of six million tonnes and three million tonnes will roll out from 2016-17.
The Adani group last August announced investments of Rs 25,200 crore in two power projects in Chhattisgarh and Rs 21,000 crore in energy and port projects in Karnataka. The group is also investing Rs 11,500 crore in expanding the capacity of its power plant in Udupi, Karnataka, which it acquired from Lanco.
Bharti Airtel had last December announced it would spend Rs 60,000 crore in upgrading its network over the next three years. Carmaker Maruti Suzuki, too, has planned investments of Rs 6,800 crore over the next three years.
These companies will benefit only if they instal the machinery before the March 2017. The allowance will also benefit a slew of public sector companies that are leading the capital expenditure thrust in the country.
