Bosch Global Software Technologies Pvt. Ltd. Vs ACIT (ITAT Bangalore)
ITAT Bangalore Recognizes Software Development as “Production”; Allows Investment Allowance u/s 32AC and Addl. Depreciation u/s 32(1)(iia)
Background: Bosch Global Software Technologies Pvt. Ltd., engaged in the development of computer software and IT-enabled services for the automobile sector, filed an appeal against the disallowance of certain tax claims by the National Faceless Assessment Centre (NFAC) for the Assessment Year 2016-17. The company claimed additional depreciation on computers used in software development under Section 32(1)(iia) and investment allowances on the purchase of computers under Section 32AC. These claims were disallowed by the Assessing Officer (AO), which was later upheld by the Commissioner of Income Tax (Appeals) (CIT(A)).
Appeal Against:
Disallowance of additional depreciation under Section 32(1)(iia)
Disallowance of investment allowances under Section 32A
Disallowance of expenses under Section 14A
Deduction of U.S. state taxes as business expense
ITAT FINDINGS:
In Bosch Global Software Technologies Pvt. Ltd. v. ACIT, the ITAT Bangalore held that software development qualifies as “production of an article or thing,” making the company eligible for additional depreciation under Section 32(1)(iia) on computers used in development. For investment allowance under Section 32AC, the Tribunal applied a functional test—allowing it only for computers used in software production, not administration—and remanded the matter for usage verification. It also accepted Bosch’s self-assessed disallowance under Section 14A, rejecting the AO’s inflated estimate, and allowed the deduction of ₹46.42 lakh in U.S. state taxes as a business expense, since no foreign tax credit was claimed.
