ITAT Bangalore Rules in Favor of Assessee, allows Deductions under Section 80JJAA and Additional Depreciation [Read Order]
The tribunal reviewed the Karnataka High Court judgment in Aquarelle India Ltd. vs. DCIT and ruled that the 300-day requirement should be applied cumulatively across the year of hiring and the following year, rather than restricting it to the first year
![ITAT Bangalore Rules in Favor of Assessee, allows Deductions under Section 80JJAA and Additional Depreciation [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/02/ITAT-Bangalore-Favor-of-Assessee-Deductions-Section-80JJAA-Additional-Depreciation-taxscan.jpg "ITAT Bangalore Rules in Favor of Assessee, allows Deductions under Section 80JJAA and Additional Depreciation [Read Order]")
The Income Tax Appellate Tribunal ( ITAT ) Bangalore Bench ruled in favor of the assessee, allowing deductions under Section 80JJAA of the Income Tax Act, 1961, and additional depreciation under Section 32(1)(iia). The tribunal found that the company met the eligibility criteria for these tax benefits and set aside the disallowances made by the Assessing Officer (AO) and the Commissioner...
The Income Tax Appellate Tribunal ( ITAT ) Bangalore Bench ruled in favor of the assessee, allowing deductions under Section 80JJAA of the Income Tax Act, 1961, and additional depreciation under Section 32(1)(iia). The tribunal found that the company met the eligibility criteria for these tax benefits and set aside the disallowances made by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) CIT(A).
Robert Bosch Engineering and Business Solutions Pvt. Ltd., a wholly-owned subsidiary of Robert Bosch GmbH, Germany. The company is engaged in software development, IT-enabled services, and embedded software development for automobile components. It had claimed a deduction of Rs.21.16 crore under Section 80JJAA for wages paid to new regular workmen and additional depreciation on computers used for software development.
Want a deeper insight into the Income Tax Bill, 2025? Click here
The AO disallowed the 80JJAA deduction, stating that the company did not meet the requirement of increasing its workforce by at least 10% over the previous year, as required under the Act. The AO also argued that only employees who completed 300 days of work in the year of hiring should be considered. Based on this interpretation, the AO concluded that the company failed to meet the threshold. The CIT(A) upheld this view, leading the company to file an appeal before the ITAT.
Chhattisgarh HC Refuse to Grant Bail on Offence Committed Under PMLA citing link with Coal Scam
The tribunal reviewed the Karnataka High Court judgment in Aquarelle India Ltd. vs. DCIT and ruled that the 300-day requirement should be applied cumulatively across the year of hiring and the following year, rather than restricting it to the first year. It found that the overall increase in employment exceeded 10% when using the correct interpretation. Based on this finding, the ITAT ruled that the assessee was eligible for the deduction under Section 80JJAA.
The company also claimed additional depreciation on computers used for software development, arguing that software development qualifies as “production of an article or thing” under Section 32(1)(iia). The AO disallowed the claim, stating that software is not a tangible article or thing and that computers do not qualify as plant and machinery.
The ITAT Bench consisted of Soundarajan K (Judicial Member) and Waseem Ahmed (Accountant Member) overturned this view and ruled that software development requires significant technical effort and qualifies as production under various Supreme Court and High Court rulings. The tribunal also observed that computers used for software development are essential to the production process and should be classified as plant and machinery for depreciation purposes.
The tribunal allowed both the 80JJAA deduction and additional depreciation, directing the AO to recompute the tax liability.
To Read the full text of the Order CLICK HERE
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
