BOSCH GLOBAL SOFTWARE TECHNOLOGIES PRIVATE LIMITED ,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BANGALORE

Page 3 of 14 plant and machinery. Consequently, the AO disallowed the claim of additional depreciation of Rs. 20,28,94,781/- and made an addition to the total income of the assessee.

Page 4 of 14 case of the assessee for A.Y. 2012-13. The relevant finding of the Tribunal vide order dated 9-12-2024 reads as under: “21. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee has claimed additional depreciation under clause (iia) of section 32 of the Act by treating the computers used for development of computer software as plant and machinery installed for manufacture or production of article or things. The claim of the assessee has disallowed by the lower authorities by holding the assessee’s business of computer software development & IT enabled services does not tantamount to manufacture or production of article or things. Further, the computers on which additional depreciation was claimed does not qualify as plant and machinery. 21.1 As per far as the question, whether the assessee is in the business of manufacture or production of article or things is concern. We note that same has been answered by the us in the preceding paragraph while dealing the with the ground of appeal in respect of claim of deduction under section 80JJAA of the Act. As previously noted, the assessee is engaged in the business of developing of computer software, and embedded software for automobile components and accessories, which involves the application of intellectual and technical efforts, and meets the criteria for the production of an article or thing. In line with this, the assessee's business activities fall under the broader definition of "production" under the Act, and thus, the development of software constitutes a form of production in a knowledge- based industry. 21.3 The argument that computers used in the development of software are part of plant and machinery is substantiated by the fact that the Income Tax Rules categorize computers and computer software within the block of plant and machinery, eligible for depreciation at a higher rate. This indicates that computers software, despite being intangible in terms of output, play a crucial role as plant and machinery in the production process. 21.4 Given that the assessee is engaged in the production of an article or thing (software), the computers used in the production of such software can be treated as plant and machinery under the provisions of Section 32(1)(iia) of the Act. Therefore, the claim for additional depreciation on the computers used in the production of software is in line with the provisions of the Act. 21.5 In light of the above, we hereby reverse the findings of the learned CIT(A) and allow the assessee's claim for additional depreciation under Section 32(1)(iia) of the Act.”

11.1 Before us, no material has been placed on record by the Revenue demonstrating that the decision of the Tribunal in own case of the assessee discussed above has been set aside/stayed or overruled by the Higher Judicial Authorities. Before us, no material was placed on record pointing out any distinguishing feature in the facts of the case of earlier AY and the year under consideration.

Page 5 of 14 11.2 Before parting, we note that identical dispute was there before this Tribunal in the case of Sling Media Pvt Ltd vs. DCIT in reported in 135 taxmann.com 164. In the said case, the coordinate bench of this tribunal held activity of assessee being development of computer software cannot be held as manufacturing activity, therefore additional depreciation under section 32(1)(iia) of the Act cannot be allowed on the block of assets being computer and software. In this context, we find that the facts involved in the case of present assessee and in the case of Sling Media Pvt Ltd (supra) are identical. However, we find that the coordinate bench in the case of Sling Media Pvt Ltd has given finding only after the considering the term manufacture of article or thing. The finding of the coordinate bench is silent regarding the term production of article or thing. As such the provision of section 32(1)(iia) of the Act uses the term “an assessee engaged in the business of manufacture or production of any article or thing”. The Tribunal in own case of the assessee for A.Y. 2012-13 as discussed above after considering the term “Production of any article or thing” has decided the issue in favour of the assessee. Hence, the view taken by this Tribunal in the case of Sling Media Pvt Ltd (supra) is distinguishable from the view taken in the own of case of the present assessee for A.Y. 2012-13. Thus, respectfully following the order of the Tribunal in the own case of the assessee as discussed above, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.

12. The next issue raised by the assessee through ground Nos. 4 to 6 of its appeal is that the learned CIT(A) erred in confirming the disallowance of the claim of investment allowances under section 32AC of the Act for Rs. 15,88,04,267/- only.

12.1 The relevant facts are that the assessee in the return of income claimed investment allowances as per the provision of section 32AC of the Act for an amount 15,8804,267/- only. The AO found that the investment allowances under section 32AC is allowed to the assessee engaged in business of manufacturing of article or thing whereas the present assessee is in the business of development of computer .

Page 6 of 14 software which does not mean a manufacturing activity. The AO further found that the provision of subsection (4) to section 32AC of the Act has defined the term “New Assets” and as per the definition, computer and computer software are not included under the purview of “new assets”. Thus, the assessee did not satisfy the condition to claim the investment allowances. Therefore, the AO disallowed the claim of the assessee and added the same to the total income.

12.2 The aggrieved assessee preferred an appeal before the learned CIT(A) wo confirmed the disallowances made by the AO.

12.3 Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.

15.1 As far as, the view of the revenue authority that the assessee is not engaged in the business of manufacture or production of any article or thing is concerned, we note that issue is settled in favor of the assessee while deciding the dispute regarding the claim of additional depreciation under section 32(1)(iia) of the Act. The precondition to claim the additional depreciation under section 32(1)(iia) of the Act and investment allowances under section 32AC of the Act same i.e. assessee should be engaged in the business of manufacture or production of any article or thing. Hence, following the finding given by us in respect of ground raised in connection to additional deprecation we hold that the assessee is engaged in the business of “manufacture or production of any article or thing”.

15.2 Now coming to the second reason given by the revenue authorities for disallowances of claim of the assessee, in this regard, we note that the provision of section 32AC(1) of the Act provides that an assessee being engaged in the business of manufacture or production of any article or thing, acquires or install new assets shall be allowed certain percentage of cost of new assets as investment allowances. The term new assets defied under subsection 4 of section 32AC which reads as under: “(4) For the purposes of this section, "new asset" means any new plant or machinery (other than ship or aircraft) but does not include— (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any previous year.”

15.3 The relevant clause in present case is clause (iii) according to which any office appliance including the computer or computer software shall not be included in the “New asset” for purpose of this section. On careful perusal of the impugned clause, it transpired that what is excluded from the term “new asset” is office appliance .

Page 8 of 14 which may include computer and computer. In other words, computer or computer software installed as office appliances are excluded and not the computer installed for the purpose of the production of article or things. Hence, the computer installed by the assessee for the purpose of development of software activity which is held by us production of article or things shall be available for investment allowances under the provision of section 32AC of the Act whereas no allowance shall be allowed on the computer installed for administrative purposes.

15.4 We find that there was no detail available on record suggesting that how many computers were installed/ used in the activity of development of computer software. Therefore, we find necessary to set aside the issue to the file of the AO to adjudicate the issue afresh in the light of the above stated discussion. The assessee shall provide the detailed of the computers installed in the activity of software development. Accordingly, the AO after verification shall allow the claim of the assessee if the new computers were installed for the purpose business of the development and not for the purpose of administration or as office appliance. Hence, the ground of appeal of the assessee is hereby partly allowed for statistical purposes.

16. The next issue raised by the assessee through ground Nos. 7 to 9 is that the learned CIT(A) erred in confirming the disallowance made by the AO under section 14A of the Act for Rs. 76.70 lakh.

16.1 During the year, the assessee earned exempt income of ₹9,17,03,820/- and made a suo-moto disallowance of expenses under section 14A of the Act, amounting to ₹22,63,862/- only. The assessee explained that this self-determined disallowance was made after identifying expenses directly related to the exempt income. Therefore, it contended that the provisions of Rule 8D of the Income Tax Rules were not applicable.

Page 9 of 14 16.2 However, the Assessing Officer (AO) disagreed with the assessee's contention. The AO found that the suo-moto disallowance made by the assessee is not commensurate to the value of the exempted income and disallowance was made in an ad-hoc manner ignoring the manner prescribed under the provision of the Act. Therefore, the AO calculated the disallowance as per Rule 8D of Income Tax Rule and determined the amount to be disallowed at ₹99,33,350/- only. Accordingly, the AO made an additional disallowance of ₹76.70 Lakh over and above the suo-moto amount disallowed by the assessee.

16.3 On appeal by the assessee, the learned CIT(A) confirmed the addition made by the AO.

Page 10 of 14 under consideration, the investments made by assessee were only fixed. He submitted that assessee is not into buying and selling of shares / investments but is carrying on software development businesses. The Ld.Counsel submitted that assessee has computed disallowance at Rs. 36,01,783/- as under: *********** 12. The Ld.Counsel submitted that the entire investments cannot be taken into consideration for disallowance under Rule 8D(2)(iii) at 0.5%. The Ld.DR on the contrary relied on the orders passed by the authorities below. We note that on identical issue, the Coordinate Bench of this Tribunal in assessee’s own case observed for Assessment Year 2008-09(supra) as under: “9.1 We heard the parties on this issue. The Ld A.R invited our attention to page 521 of the paper book, wherein the details of investments are given. He submitted that the assessee has made investments only in units of various mutual funds. The aggregate amount of investments made during this year was Rs.90.59 crores. He further submitted the assessee has also invested a sum of Rs.15.00 crores in growth scheme and a sum of Rs.20.26 crores in dividend reinvestment scheme. The assessee has made investments in six schemes only during the year under consideration and it has encashed investments made in the earlier years in four schemes. He submitted that the assessee has not really incurred any expenditure in earning the dividend income. On the contrary, the Ld D.R supported the order passed by Ld CIT(A). 9.2 We heard the parties on this issue and perused the record. We notice that opening balance of investments stood at Rs.25.59 crores in four schemes of mutual funds. During the year under consideration, the above investments have been realised. The assessee has made fresh investments in six schemes of mutual funds during this year, out of which three schemes fall under Growth/reinvestment schemes. Considering the less number of schemes, in our view, it may not be proper to apply Rule 8D mechanically. Accordingly, we are of the view that the disallowance may be estimated to meet the requirements of sec.14A of the Act. Accordingly, we estimate the disallowance u/s 14A at Rs.2.00 lakhs and in our view, the same would meet the requirements of the provisions of sec.14A of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s 14A to Rs.2.00 lakhs.”

13. In the above observations for Assessment Year 2008-09, there no disallowance was made by assessee this Tribunal deem it appropriate to restrict the disallowance to Rs.2 Lakhs considering the less number of schemes that fall under growth / investment schemes. Going by the above principle and also observing the fact that the Ld.AO has not expressly mentioned any dissatisfaction in the suomoto disallowance computed by assessee we hold that the disallowance computed by the assessee is appropriate.

29.1 The Bombay Tribunal in the case of Bank of India Vs. ACIT reported in 125 Taxmann.com 155 involving identical facts and circumstances has held as under: “80. To sum up, the assessee is declined the foreign tax credits for Rs. 182,64,22,948, and, accordingly, we hold that the assessee is not entitled to seek a refund of that money from the Indian tax exchequer. As we hold so, we may add that in the present case, our entire focus was on whether these foreign tax credits could be allowed even when such tax credits lead to a situation in which taxes paid abroad could be refunded in India, but that must not be construed to mean that, as a corollary to our decision, these foreign tax credits would have been allowed, even if there is no domestic tax liability in respect of the related income in India if it was not to result in such a refund situation. At the cost of repetition, we may add that, for the detailed reasons set out earlier, we have our reservations on the applicability of the Wipro decision (supra) on this bench, being situated outside of the .

Page 13 of 14 jurisdiction of Hon'ble Karnataka High Court, and we are of the considered view that full tax credit for source taxation cannot, as such and to that extent, be extended in the residence jurisdiction when a tax treaty sanctions only proportionate credit, and does not, in any case, specifically provide for the full foreign tax credit. A full tax credit, which goes beyond eliminating double taxation of an income, actually ends up subsidizing the foreign exchequer, to the extent that the taxes paid to the foreign exchequer are allowed to discharge exclusive domestic tax liability, rather than eliminating double taxation of an income, and that is the reason that even in the solitary full credit situation visualized in the Indian tax treaties, in the Indo Namibia tax treaty (supra), it's one-way traffic inasmuch as while India, as a relatively developed nation, offers, under article 23(2), full credit for taxes paid in Namibia, whereas, in contrast, Namibia, as a developing nation, offers, under article 23(1), proportionate credit for taxes paid in India. It reinforces our understanding that the full foreign tax credits cannot be inferred to be permissible as a matter of course and normal practice. Just because the coordinate benches have subconsciously taken a stand that seems to be condoning, and in a way legitimizing, a contrary perception, even if that be so, we cannot, particularly after taking a closer look at the situation, follow the same course. When such huge national revenues, involving thousands of crores, are involved in this macro issue, we cannot afford to be superficial, or perfunctory, in our approach. On a separate note, nevertheless, we do uphold the claim of the assessee that these taxes paid abroad will be allowed as a deduction in the computation of the business income of the assessee.”

29.2 From the above order of Bombay Tribunal, it is transpired that if the assessee is not eligible for the benefit of the provisions specified under section 90/91 of the Act, then the assessee is eligible for deduction representing the amount of tax paid in the foreign country. Accordingly, respectfully following the order of Bombay Tribunal discussed above, we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee, is hereby allowed.

30. The issue raised by the assessee through ground No. 11 of its appeal is that the revenue authority erred in not granting the credit of MAT as per section 1115JAA of the Act.

Order pronounced in court on 16th day of April, 2025