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One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769699 https://www.taxtmi.com/caselaws?id=769699 Additional depreciation u/s 32(1)(iia) on computers used for the production of software - 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 - AO held that computer software is not an article or thing - HELD THAT:- 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 [2024 (12) TMI 1561 - ITAT BANGALORE] wherein held 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. Decided in favour of assessee. Disallowance of the claim of investment allowances u/s 32AC - AO denied claim as being the assessee not engaged in the business of manufacture or production of any article or thing AND 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 - HELD THAT:- 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 u/s 32(1)(iia) of the Act. The precondition to claim the additional depreciation u/s 32(1)(iia) of the Act and investment allowances u/s 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". Whether computer or computer software not included in the definition of "New Assets" as per the provision of section 32AC(4)(iii)? - What is excluded from the term "new asset" is office appliance 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. 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. 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. Disallowance u/s 14A - assessee earned exempt income and made a suo-moto disallowance of expenses - HELD THAT:- We note that that the issue of disallowance under section 14A of the Act is covered in favour of the assessee by the order of this Tribunal in the own case of the assessee for A.Y. 2010-11 [2022 (2) TMI 1503 - ITAT BANGALORE] as held 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. Disallowance of claim of deduction of state tax paid in USA - assessee claimed that the impugned tax is prior charges on the income, and the impugned payment was claimed as an expenditure in the return of income - 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 - HELD 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 Bank of India [2021 (3) TMI 343 - ITAT MUMBAI], 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. Not granting the credit of MAT as per section 115JAA - HELD THAT:- As we note that the issue of MAT credit was raised first time before us. The lower authorities did not get the opportunity to apply their mind. Therefore, in the interest of justice and fair play, we set aside the issue to the file of the AO. AO is directed to allow MAT credit, if any, as per law. The assessee is directed to furnish the necessary details. Henc the ground of appeal of the assessee is allowed for statistical purposes. Case-Laws Income Tax Wed, 16 Apr 2025 00:00:00 +0530