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Issues: (i) Allowability of expenditure on replacement of dies and moulds; (ii) Deduction under Section 35(1)(iv); (iii) Deduction under Section 35(2AB) for research and development expenditure; (iv) Deduction under Section 80-IA on notional profit from captive power generation; (v) Allowability of agency commissions paid to foreign agents; (vi) Depreciation rate for UPS and voltage stabilizers; (vii) Depreciation rate for temporary construction.
Issue (i): Allowability of expenditure on replacement of dies and moulds.
Analysis: Replacement dies and moulds attached to manufacturing machinery were treated as components necessary for restoring the machinery's specified output, rather than as independent plant and machinery. The expenditure consequently fell for consideration under Section 31 of the Income-tax Act, 1961.
Conclusion: In favour of the assessee: expenditure on replacement of dies and moulds is allowable.
Issue (ii): Deduction under Section 35(1)(iv).
Analysis: The issue was governed by the established treatment of the assessee's claim under Section 35(1)(iv) of the Income-tax Act, 1961, which had sustained the corresponding finding of the Tribunal on materially similar facts.
Conclusion: In favour of the assessee: the deduction under Section 35(1)(iv) is allowable.
Issue (iii): Deduction under Section 35(2AB) for research and development expenditure.
Analysis: The research and development claim, including the component relating to work-in-progress, was governed by the prior determination on identical facts under Section 35(2AB) of the Income-tax Act, 1961.
Conclusion: In favour of the assessee: the deduction under Section 35(2AB) is allowable.
Issue (iv): Deduction under Section 80-IA on notional profit from captive power generation.
Analysis: The computation of profits from the captive power undertaking was governed by the applicable interpretation of Section 80-IA of the Income-tax Act, 1961 and the relevant departmental circular, as applied in the earlier decision on the same issue.
Conclusion: In favour of the assessee: deduction under Section 80-IA on notional profit from captive power generation is allowable.
Issue (v): Allowability of agency commissions paid to foreign agents.
Analysis: No variation in facts or legal position was shown from the earlier final determination concerning commissions paid to foreign agents, including the issue of their characterization under Section 9(1)(vii) of the Income-tax Act, 1961.
Conclusion: In favour of the assessee: the agency commissions are allowable.
Issue (vi): Depreciation rate for UPS and voltage stabilizers.
Analysis: UPS and voltage stabilizers used with computers were treated as integral computer-related equipment. The applicable rate was fixed consistently with the precedents governing depreciation on such equipment.
Conclusion: Partly in favour of the assessee: depreciation on UPS and voltage stabilizers is allowable at 60% instead of 15%.
Issue (vii): Depreciation rate for temporary construction.
Analysis: The temporary construction was a parking shed, for which the applicable depreciation rate under the prior determination was 10%, not 100%.
Conclusion: In favour of the Revenue: depreciation on the temporary construction is allowable only at 10%.
Final Conclusion: The deductions and allowances claimed by the assessee were sustained on the first five issues, depreciation on UPS and voltage stabilizers was confined to 60%, and depreciation on the temporary structure was restricted to 10%.
Replacement Machinery Components and Captive Power Profits Support Tax Deductions, While Temporary Structures Receive Limited Depreciation
Replacement dies and moulds forming components of manufacturing machinery qualify as repair expenditure rather than independent plant. Research-related deductions, including qualifying work-in-progress, remain allowable on materially identical facts. Captive-power profits may support the applicable deduction on a notional-profit basis. Foreign agency commissions remain allowable where the facts and legal position are unchanged, including their characterization for income-tax purposes. UPS and voltage stabilizers used with computers attract depreciation as integral computer equipment at 60%, while a temporary parking shed attracts depreciation only at 10%.
Replacement of dies and moulds as current repairs - Deduction for capital scientific research expenditure - Weighted deduction for research and development work-in-progress - Deduction on notional profits from captive power generation - Deductibility of commission paid to foreign agents - Depreciation on UPS and voltage stabilisers as computer peripherals - Depreciation on temporary parking shed Replacement of dies and moulds as current repairs - Allowability of expenditure on replacement of dies and moulds attached to manufacturing machinery - HELD THAT: - The Court accepted the common position that the claim was governed by an earlier decision in the assessee's own case [2014 (2) TMI 522 - MADRAS HIGH COURT]. [Paras 4] The replacement expenditure was allowed. Deduction for capital scientific research expenditure - Deduction under section 35(1)(iv) for capital expenditure on scientific research - HELD THAT: - Both sides agreed that the claim stood covered by the earlier decision [2014 (2) TMI 522 - MADRAS HIGH COURT] affirming the Tribunal's view on the deduction. [Paras 5] The deduction was allowed. Weighted deduction for research and development work-in-progress - Weighted deduction under section 35(2AB) for research and development expenditure relating to work-in-progress. - HELD THAT: - The Court accepted the parties' agreed position that the issue was covered in favour of the assessee by the earlier decision [2026 (3) TMI 1283 - MADRAS HIGH COURT] on identical facts and legal position. [Paras 6] The weighted deduction was allowed. Deduction on notional profits from captive power generation - Deduction under section 80-IA on notional profits derived from captive power generation. - HELD THAT: - This question is to be decided in favour of the assessee as Bench has analysed the provisions of Section 80IA, the judgment of the Supreme Court in CIT vs. TANFAC Industries Ltd. [2009 (7) TMI 1260 - SUPREME COURT] and the Circular of the Central Board of Direct Taxes dated 03.10.2001 to come to the conclusion that the issue must be answered in favour of the assessee. [Paras 7] The deduction was allowed. Deductibility of commission paid to foreign agents - Allowability of agency commission paid to foreign agents for promoting business abroad - HELD THAT: - Earlier orders in the assessee's case [2026 (3) TMI 1283 - MADRAS HIGH COURT] had accepted the claim, and the Court found no material indicating any variation in the facts or legal position for the relevant assessment year. [Paras 8] The commission expenditure was allowed. Depreciation on UPS and voltage stabilisers as computer peripherals - Rate of depreciation allowable on UPS and voltage stabilisers used with computers. - HELD THAT: - Following the earlier decisions Indian Overseas Bank [2026 (10) TMI 613 - MADRAS HIGH COURT], Cholamandalam MS General Insurance Company Ltd. [2025 (6) TMI 1488 - MADRAS HIGH COURT] and Nestle India Ltd. [2023 (7) TMI 242 - DELHI HIGH COURT] referred to by both sides, the Court held that the eligible rate was 60%. [Paras 9] Depreciation was allowable at 60% instead of the rate granted by the Revenue. Depreciation on temporary parking shed - Rate of depreciation on temporary construction in the nature of a parking shed - HELD THAT: - The assessee conceded that the structure was a parking shed for which the applicable depreciation rate, as settled in the earlier decision[2014 (2) TMI 522 - MADRAS HIGH COURT], was 10%. [Paras 10] The Assessing Authority's order was restored and the issue was decided in favour of the Revenue. Final Conclusion: The assessee's claims on the first five issues were upheld. Depreciation on UPS and voltage stabilisers was fixed at 60%, while the Revenue succeeded on depreciation for the temporary parking shed.