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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

Konark Hospitals Ltd sets up a new 120-bed hospital. Machinery costing Rs. 2 crore was acquired new. Previously used machinery transferred from its old unit is also installed. What is the maximum value of this previously used machinery for the condition in section 46(3)(b) to be deemed complied with, if total machinery and plant used in the hospital is valued at Rs. 10 crore (including the transferred items)?

The limit is Rs. 2 crore, because previously used machinery transferred to the specified business is tolerated up to 20% of the total value of machinery and plant used in the business. Twenty percent of Rs. 10 crore equals Rs. 2 crore.

  1. ARs. 1 crore
  2. BRs. 1.5 crore
  3. CRs. 2 croreCorrect
  4. DRs. 2.5 crore

Explanation

Under section 46(11)(f), previously used machinery is tolerated if its value does not exceed 20% of the total value of machinery or plant used in the business. 20% of Rs. 10 crore is Rs. 2 crore. Rs. 1 crore reflects 10%, and Rs. 2.5 crore reflects 25%, which is too high.

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