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

Sagar Warehousing Pvt Ltd sets up a new specified business and installs plant. Total plant and machinery used in the business is valued at Rs. 100 lakh, of which previously used plant transferred from another existing business of the company is valued at Rs. 15 lakh. Which statement follows from section 46?

The condition is treated as complied with. Previously used plant is 15% of the total Rs. 100 lakh, which does not exceed the 20% limit in section 46(11)(f), so the bar on transferred used plant in section 46(3)(b) is deemed satisfied.

  1. AThe condition against transfer of previously used plant is treated as complied with, since the used plant does not exceed 20% of the total valueCorrect
  2. BThe business fails the condition, because any previously used plant disqualifies it
  3. CThe business fails because used plant exceeds 10% of the total value
  4. DThe deduction is allowed only on the Rs. 85 lakh of new plant, and the condition is irrelevant

Explanation

Used plant is 15/100 = 15%, which does not exceed 20%. Under section 46(11)(f), the condition in section 46(3)(b) is then deemed complied with. The 10% threshold is invented.

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