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TMI Blog2025 (4) TMI 1613X X X X Extracts X X X X X X X X Extracts X X X X ..... Business Solutions Pvt. Ltd.), is a wholly owned subsidiary of Robert Bosch GmbH, Germany. The company is engaged in the business of developing computer software, providing IT-enabled services, and developing embedded software for automobile components and accessories. 5. The assessee, in its return of income, claimed additional depreciation under section 32(1)(iia) of the Act on computers used for the production of software. The assessee explained that it was in the business of development embedded software, which amounts to the production of an article or thing, and that the computers used for software production qualify as plant and machinery, thus making them eligible for additional depreciation. 6. On the other hand, the AO held that computer software is not an article or thing. The AO noted that while the term "article or thing" is not defined under the Act, an inference can be drawn from the provisions of section 10A of the Act, where the phrase "articles or things or computer software" is used meaning thereby the computer software is different from article or things. Likewise, the provision of section 10AA of the Act also mentions "Manufacture or produce article or things ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2012-13 in IT(TP)A No. 593/Bang/2020. 10. On the other hand, the learned DR before us vehemently reiterated the findings contained in the order of the authorities below. 11. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that issue on hand is covered in favour of the assessee by the order of coordinate bench of this Tribunal in the own 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 claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt Ltd vs. DCIT in ITA No. 197/Bang/2020 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 Medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has claimed investment allowance under section 32AC of the Act on account of purchases of computers. The revenue authorities disallowed the assessee claim for 2 reasons. The first reason being the assessee not engaged in the business of manufacture or production of any article or thing and the second reason being the computer or computer software not included in the definition of "New Assets" as per the provision of section 32AC(4)(iii) of the Act. 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 busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, 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 Rs.9,17,03,820/- and made a suo-moto disallowance of expenses under section 14A of the Act, amounting to Rs.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. 16.2 How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned tax is prior charges on the income. Accordingly, the impugned payment was claimed as an expenditure in the return of income. 24. However, the AO disallowed the same by holding the taxes paid in foreign territory can be claimed under section 90/91 of the Act following the procedure and condition provided therein and not as a deduction. 25. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the disallowance by observing as under: "8. Ground number 13, the assessee objects to disallowing Rs. 46,42,788/- being state taxes paid by the assessee by its branch in USA. With respect to "State Taxes Paid in USA" amounting to Rs. 46,42.788/-, the assessee argued that as per US state tax regulations, every entity is mandatorily liable to pay taxes are given as deduction from income tax liability payable under the US Federal Income Tax Laws. In other words State Taxes is prior charge on the income of the assessee that is to say that it is diversion by overriding title at stage of earning profit itself. 9. However, the foreign tax credit can be claimed u/s 90/91 of the Income Tax Act, 1961. The section specifically mentions the procedure by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our reservations on the applicability of the Wipro decision (supra) on this bench, being situated outside of the 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 reinforce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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