DCIT CORPORATE CIRCLE 3(1), CHENNAI V. TVS MOTOR COMPANY LIMITED, CHENNAI

ITTPA 67/CHNY/2019

AI Insights

The case involves appeals by both the Revenue and the assessee, TVS Motor Company Limited, against the order of the CIT(A) for the assessment year 2014-15. The primary issues revolved around transfer pricing adjustments and the claim of additional depreciation. The Revenue challenged the CIT(A)'s reduction of the transfer pricing adjustment from Rs.14.78 Crores to Rs.2.25 Crores, while the assessee contested the disallowance of additional depreciation and the treatment of management support services as non-taxable. The Tribunal's decision focused on the proper application of transfer pricing rules and the eligibility for additional depreciation under the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717285 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 13-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 03-09-2019
• Other Referred Cases: HDFC Bank Ltd. v. DCIT, CIT v. Reliance Utilities and Power Ltd., ACIT v. Vireet Investment (P.) Ltd., Scientific Engineering House Pvt Ltd v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Set aside; Capital asset; Opportunity of being heard; Revised return; Transfer pricing; International transaction; Depreciation; Additional depreciation; Rule of consistency; Rule 8D
• Section: 32; 28; 14A; 32(1)(iia)

Judgement Text

"आयकर अपीलीय अधिकरण, ’डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं श्री अयिताभ शुक्ला, लेखा सदस्य क े समक्ष BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.67/Chny/2019, Assessment Years: 2014-15 आयकर अपील सं./ITA No.2405/Chny/2019, Assessment Years: 2014-15 Deputy Commissioner of Income Tax, Corporate Circle-3(1), Chennai. M/s.TVS Motor Company Limited, No.29/8, Jayalakshmi Estates, Haddows Road, Nungambakkam, Chennai-600 006. [PAN: AAACS7032B] आयकर अपील सं./ITA No.2405/Chny/2019, Assessment Years: 2014-15 M/s.TVS Motor Company Limited, No.29/8, Jayalakshmi Estates, Haddows Road, Nungambakkam, Chennai-600 006. [PAN: AAACS7032B] Deputy Commissioner of Income Tax, Corporate Circle-3(1), Chennai. (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri R.Vijayaraghavan, Advocate, प्रत्यर्थी की ओर से /Revenue by : Shri A.Sasikumar, CIT सुनवाई की तारीख/Date of Hearing : 18.06.2025 घोषणा की तारीख /Date of Pronouncement : 13.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : Both the appeals vide IT(TP)A No.67/Chny/2024 filed by the Revenue and vide ITA No.2405/Chny/2019 filed by the assessee are against the order bearing ITA No.167/17-18 dated 19.06.2019 of the Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 2 - of 26 Learned Commissioner of Income Tax [herein after “CIT(A) for the assessment year-2014-15. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time. IT(TP)A No.67/Chny/2019 for the Assessment Year-2014-15 2.0 The first issue raised by the Revenue through its ground of appeal is regarding the action of the Ld.CIT(A) in restricting the addition made by the Ld.AO of Rs.14.78 Crores to Rs.2.25 Crores. The Ld. Counsel for the assessee informed that the appellant company is engaged in the business of manufacturing of two wheeler and other vehicles. The international transactions of the appellant assessee was subjected to TP verification whereby the Ld.TPO made impunged addition of Rs.14,78,78,398/-. Brief factual matrix of the case is that the assessee transfers its goods from non 80IC unit to 80IC unit. In response to show cause of the Ld.TPO the assessee has contended that no TP adjustments are required to be made in its case, as the gross level margin of the eligible 80IC undertaking was lower than the gross level margin of the domestic vehicle segment at the entity level after excluding the profit of eligible undertaking. The Ld.TPO however rejected the arguments of the assessee on the premise that in the books of eligible unit though there was an incidence of excise duty but no revenue was Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 3 - of 26 recognized by the assessee. Ld. TPO concluded that a meaningful comparison between the two units - eligible vs domestic is only possible by eliminating the excise duty element from the eligible unit. The impugned exercise by the Ld.TPO led to variance in GP margin translating into alleged addition profit of Rs.23.78 Crores app. or 9.86%. The Ld.TPO therefore concluded that there was a requirement for loading the transactions with a 10% markup and proceeded to make an addition of Rs.14,78,78,398/-. Before the Ld.CIT(A), the assessee reiterated its objections made before the Ld.TPO. It was contended that gross margin earned by eligible unit is less than those of domestic unit, price at which components are transferred by its Hosur Unit to its 80IC unit were the same as that transfer from Hosur to Mysore unit. The assessee had contended that it has been consistently following a uniform pricing for transfer of components to all its branches. The Ld. Counsel for the assessee submitted that before the Ld.CIT(A) it had submitted an alternate computation of gross profits of domestic and eligible units. Reference was invited to paras 7 – 8 on pages 10 – 11 of the order of Ld.CIT(A). It revealed that the difference in gross profit was only 0.54% i.e 19.41% minus 18.87 %. This exercise was done after eliminating the excise duty comparison. The Ld.AR submitted that the Ld.First Appellate Authority estimated a figure of 2% which gave the excess profit Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 4 - of 26 figure of Rs.2.25 Crores. Accordingly, he ordered to reduce Rs.2.25 Crores from the 80IC computation of the eligible unit. 3.0 The Ld. DR vehemently argued in favour of the order of the Ld.AO submitting that the Ld.CIT(A) has allowed excessive relief. 4.0 We have heard rival submissions in the light of material available on records. Before us the Ld.Counsel for the assessee defended the order of the Ld.CIT(A) estimating addition @ 2% albeit with the rider that second proviso to section 92C(2) of the Act postulates that if the difference between the actual price and the ALP is less than 3% no addition is required to be made. The Ld. Counsel for the assessee submitted that it operates its business in a captive customer scenario. Thus, it was argued that the assessee is doing captive or to say customized manufacturing of components to be used in motor bikes and because it is transferring to its own entities there cannot be a case of market value. It was argued that consequently the entire exercise conducted by lower authorities was not required. We have noted that the assessee is indeed engaged in a captive customer scenario as it is into activity of customized manufacturing of components to be used in motor bikes. The element of market value therefore cannot be attributed to its products as they are specific to its own motor bikes. We have noted that the Ld.CIT(A) has comprehensively dealt the issue in pages 3 to 11 of its order by properly collating and compiling intricate facts of the Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 5 - of 26 case. We are therefore of the considered view that there is no case made out for intervention to the order of the Ld.CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) on the issue of upward adjustments and dismiss all the grounds of appeal raised by the Revenue. 5.0 The next issue raised by the Revenue through its grounds of appeal is regarding another upward adjustment of Rs.17,69,67,000/- made by the Ld.AO on account of management support services and its deletion by the Ld. CIT(A). The brief factual matrix of the case is that the assessee has obtained administrative support service comprising internal audit, legal, consultancy, taxation trademark etc from its AEs namely Sundaram Clayton Ltd(SCL) and Dua Consulting Pvt Ltd (DCPL). The Ld.TPO made the following observation while making the impugned upward adjustments:- “…8.7 To sum up, the assessee has failed to justify the basis of allocation of cost. The entire exercise seems to be ad-hoc in nature with a view to shift the cost. Out of the list of services, the assessee has failed to come out with any evidence for receipt of services. Under these circumstances, the assessee having failed to establish the receipt of services coupled with the fact that it has its own army of dedicated people, the need factor for receipt of services also appears to be absent. The agreement which provides for an upward revision of 15% per annum, without justifying the basis has another dimension to this issue. Therefore, as proposed in the show-case notice, the arm’s length price of the services not proved to have been received would be entitled only to a NIL payment form the service recipient if it happens to be a transaction with a uncontrolled party. Accordingly, the ALP of the claim of payment for the alleged claim of receipt of management support services is determined to be Nil…” Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 6 - of 26 The Ld.Counsel for the assessee submitted that the expenses have been governed by a management services agreement dated 29.03.1997 and consequently the assessee has been paying amounts to its holding company SCL. It was submitted that it is common practice to appropriate such expenses among group companies by the holding companies and that it is not the case of profit shifting. The Ld.Counsel submitted that the Ld.CIT(A) has extensively dealt the issue in para 12 to 13 on page 19 to page 20 of the order rightly holding that the services were indeed rendered to the assessee as also that payments by the assessee were tax-neutral. It was requested that the order of the Ld.CIT(A) be upheld. 6.0 Per contra, the Ld. DR relied upon the order of the Ld.TPO. 7.0 We have heard the rival submissions in the light of material available on records. We have noted that the factum of rendering of services by the AEs to assessee have been vividly examined by the Ld.CIT(A) in para 12 and 13 of his order. The assessee has also contended that no disallowance was made by the Revenue in the earlier years and was made only once in AY-2017-18. Since AY-2018-19 again no disallowance was made. We have noted that the basic objections of the Ld.TPO was non-rendering of services, a fact which has been adequately and appropriately examined and negated by the Ld.CIT(A) before according relief to the assessee. Accordingly, we do Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 7 - of 26 not find any need to interfere with the order of the Ld.CIT(A) at this stage. Non-interference by the Revenue on this issue in earlier or subsequent years has also been considered. Principle of consistency deserves to be followed by Revenue in matters particularly when there is no change in facts. Consequently, we uphold the order of the Ld.CIT(A) and dismiss all the grounds of appeal raised by the Revenue on the issue of upward adjustment of Rs.17,69,67,000/- on account of management support services. 8.0 The next issue raised by the revenue is regarding the action of Ld. CIT(A) in deleting an addition of Rs.16,71,32,882/- made by the Ld.AO on claim of additional depreciation. As per the brief factual matrix, the Ld.AO noted that the assessee had claimed additional depreciation qua remainder amount which could not be claimed in the earlier year. The Ld.AO held that additional depreciation is allowable only in respect of plant and machinery purchased and put to use in a year. The Ld.AO further held that assessee’s reliance upon a favourable decision in its favour delivered by this tribunal for AY-2011-12 cannot be considered since the department is in appeal before the Hon’ble Jurisdictional High Court. The Ld. Counsel for the assessee argued before us that this tribunal has also allowed the issue in its own case for AY-2012-13 vide ITA no.672/Mds/2011 dated 24.01.2025. Accordingly, the Ld.AR argued in favour of the order of the Ld.CIT(A). Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 8 - of 26 9.0 The Ld. DR per contra relied upon the order of Ld.AO. 10.0 We have heard the rival submissions in the light of material available on records. It is the case of the assessee that correct amount of additional depreciation was only Rs.1,64,60,585/- and not Rs.16,71,32,882/- as wrongly held by the Ld.AO. It was stated that the balance of Rs.15.07 Crores is the current year’s depreciation. The Ld. CIT(A) while giving relief, noted the argument of the assessee that assessee was entitled for 50% additional depreciation since it had only part claim the amount in the preceding assessment year. It is the case of the assessee that it had only claimed half of its entitlement in the preceding assessment year given the fact it had used the asset for less than 180 days. We have noted that an Hon’ble Coordinate Bench of this tribunal in assessee’s own case vide ITA No.672/Chny/2017 for AY-2012- 13 for AY-2012-13, while considering order of the Hon’ble Karnataka High Court in the case of Rittal (India) Limited 388 ITR 423 and of Hon’ble Jurisdictional High Court in assessee’s own case for AY-2004-05 in TCA No.294 of 2016 dated 14.03.2017 held that the assessee is entitled for its claim of additional depreciation qua amounts not claimed in the preceding year. We have noted that the facts of the case are identical and no distinguishment could be made by the Ld. DR. Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 9 - of 26 11.0 Respectfully following the above judicial precedence, we are of the considered view that the assessee is entitled for its claim of the additional depreciation made during the year. We have however noted that the Ld.AO has made an addition of Rs.16,71,32,882/- whereas the assessee has stated that its claim of additional depreciation was only half an amount of Rs.1,64,60,585/-. We have also noted that the Ld.AO has indicated in his order that the assessee had made a mistake in calculation of its claim of additional depreciation to an extent of Rs.74,50,227/-. Accordingly, we deem it appropriate to remit the matter to the file of the Ld.AO for the limited purpose of calculating and allowing the correct amount of additional depreciation available for being claimed in this year by the assessee. The assessee is entitled to submit any details deemed necessary in this regard and shall be entitled to due opportunity of being heard. Accordingly, the grounds of appeal raise by the Revenue is dismissed. ITA No.2405/Chny/2019, Assessment Year-2014-15 12.0 The first ground of appeal raised by the assessee through its cross objection is regarding the addition of Rs.3,99,16,884/- made by the Ld.AO u/s 14A and its confirmation by the Ld.CIT(A). The Ld.AO had Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 10 - of 26 made the impugned addition rejecting the favourable decision of this tribunal in assessee’s on case in AY-2008-09 and AY-2009-10 on the premise of the same being contested by the department before the Hon’ble Madras High court. The Ld. Counsel for the assessee submitted that there is no case for any addition under 14A and that its case is covered by the decision of this tribunal in its own case for AY-2012-13 vide ITA No.672/Chny/2017 supra. 13.0 The Ld. DR would like to place reliance upon the order of lower authorities. 14.0 We have heard rival submissions in the light of material available on records. We have noted that in ITA No.672/Chny/2017 supra this tribunal in assessee’s own case for AY-2012-13 has held as under:- “.... 6. Ground No.10 is against the disallowance of u/s.14A of the Act read with Rule 8D. 6.1 Brief facts are that, the AO noted that assessee has earned dividend income of Rs.2,42,00,000/- and held investments as on 31.03.2012 to the tune of Rs.930,92,00,000/-. Therefore, according to him, disallowance u/s.14A r.w.r.8D was required. The AO accordingly computed disallowance of Rs.8,28,74,299/- under Rule 8D. Having regard to the fact that the assessee had suomoto disallowed sum of Rs.94,55,825/-, the AO made further disallowance of Rs.7,84,18,474/-. The action of the AO was upheld by the DRP. Aggrieved, the assessee is before us. 6.2 Heard both the parties. It was brought to our notice that, the assessee has own funds of Rs.1121 Crs. as against investments of Rs.930 Crs as on 31.03.2012. In light of the aforesaid fact, the assessee claimed that since its own funds were much higher than the investment made by it, the question of making disallowance out of interest paid on borrowed funds in terms of Rule 8D(2)(ii) did not arise. The Ld. AR brought to our notice the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. v. DCIT (2014) 366 ITR 505 wherein it was held that \"where assessee's own funds and other non-interest bearing funds were more than investment in tax free securities, impugned order passed by the Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 11 - of 26 Assessing Officer disallowing a part of interest payments under section 14A of the Act (read with rule 8D(2)(ii) of I.T Rules, 1962) needs to be set aside\". We note that Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 has laid the proposition of law that, when there are both interest free funds and interest bearing funds, the presumption is that interest free funds were utilized for interest free investment and advances. Thus, we note from the factual matrix discussed supra, that assessee had total own funds more than Rs 1121 crores and the total investment made only to the tune of Rs. 930 crores, therefore, the presumption in the cases of Reliance Utilities & Power Ltd supra is clearly applicable and the Ld. DR could not demonstrate that this presumption is factually incorrect, therefore, the disallowance made under section 14Aread with Rule 8D(2)(ii) of the Rules, was not warranted and is directed to be deleted. 6.3 Coming to disallowance under Rule 8D(2)(iii), it is noted that the Special Bench of this Tribunal in the case of ACIT v. Vireet Investment (P.) Ltd. reported in [2017] 82 taxmann.com 415, has held that only the dividend yielding investments are to be considered in computation of disallowance under this Rule. In this regard, the Ld. AR for the assessee also referred to the revised computation of disallowance in terms of Rule 8D(2)(iii) with reference to dividend yielding investments, which was placed at Page 106 of the Paper Book. Respectfully following the decision of Special Bench (supra), the AO is directed to verify the computation provided by the assessee andre-compute the disallowance under section 14A read with Rule 8D(2)(iii) accordingly. This ground is therefore partly allowed…” 15.0 We have noted that the facts of the present case are identical to those as available in AY-2012-13 supra and no distinguishment could be pointed out by the Revenue’s counsel. Accordingly, respectfully following the cited judicial precedence we deem it appropriate, in the interest of justice to direct the Ld.AO to verify the computation provided by the assessee and recompute the disallowance u/s 14A r.w. Rule 8D(2)(iii), in the light of ratio laid down in the orders mentioned supra. The grounds of appeal raised by the assesse on this issue are therefore partly allowed. Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 12 - of 26 16.0 The next raised by the appellant assessee is regarding the action of the Ld.CIT(A) in confirming the disallowance made by the Ld.AO u/s 32AC amounting to Rs.2,75,60,290/-. It is necessary to briefly recapitulate the factual matrix of the case. As per para 8 on page 7 of the assessment order, the Ld.AO had noted that the assessee had claimed deduction u/s 32AC amounting to Rs.22,52,91,096/-. The Ld.AO noted that the same included an amount of Rs.2,75,60,290/- being 15% of Rs.18,37,35,270/-. In response to AO’s queries, the assessee submitted that it had entered into a technical agreement with BMW AG for manufacturing vehicles for export and local sales with technical knowledge from BMW AG. The assessee had acquired from BMW AG technical know-how, drawing and technical services together with the right to manufacture motor cycles. The impugned payment to BMW AG constituted payment for acquisition of intangible assets by way of drawings, design etc. The assessee had submitted that “…These expenses will be capital in nature which will have to be capitalized and depreciation claimed as and when it is put in use. This clearly establishes the facts that this technical knowledge as an intangible asset clearly is eligible for depreciation as laid down u/s 32(1)(ii)…” . The Ld. AO rejected the argument of the assessee on the premise that allowance u/s. 32AC is available if an assessee acquires and installs a new asset during FY-2013-14 and FY-2014-15 provided the “actual cost” of the new Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 13 - of 26 asset exceeds Rs.100 Crores. The Ld. AO premised that the mere capitalization of “Intangible plant and machinery” cannot be taken as cost of new asset. In appeal the Ld. CIT (A) examined the matter and proceeded to uphold the order of the Ld.AO. The assessee had reiterated arguments taken before the Ld.AO while simultaneously placing reliance upon the order of Hon’ble Apex Court in the case of Scientific Engineering House Pvt Ltd. It was concluded, in para 27 on page 37 of appellate order, that the impugned drawings, designs and other commercial rights had not been included by the assessee in its schedule of fixed assets. It was observed that the company had claimed depreciation on these as intangible assets eligible for higher depreciation of 25% per year. The Ld. CIT(A) observed that the assessee has already enjoyed a special benefit available under the Act and that if these intangible assets were to be categorized as plant and machinery, they will be eligible for depreciation only @ 15%. It was concluded that the assessee cannot have both the benefits i.e to say either it can claim depreciation as the assets being plant and machinery @ 15% and deduction u/s 32AC or alternatively claim deduction @ 25% treating the same as intangible assets. Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 14 - of 26 17.0 The Ld.DR reiterated the arguments taken by the Ld.AO and the Ld.CIT(A). It was vehemently argued that the assessee can either treat the impugned asset as an intangible asset or thus make claim for the special rate of depreciation or else claim it as normal asset eligible for routine rate of depreciation in furtherance of its claim u/s 32AC. It was submitted that the judicial ratio laid down by the Hon’ble Apex Court in the case of Scientific Engineering House Pvt Ltd 157 ITR 86, which has been heavily relied upon in this case therefore has no applicability qua facts of the present case. 18.0 We have heard the rival submissions in the light of material available on records. Before proceeding further, we deem it appropriate to extract the relevant statutory provisions of the Act as well as the judicial ratio laid by the Hon’ble Apex Court in the case of Scientific Engineering supra which have been found seminal to the present controversy. Section-2(11) defining block of assets “…..Section-2(11) 6[(11) ―block of assets‖ means a group of assets falling within a class of assets comprising— (a) tangible assets, being buildings, machinery, plant or furniture; (b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, in respect of which the same percentage of depreciation is prescribed;] Section-32AC of Act Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 15 - of 26 1[32AC. Investment in new plant or machinery.—(1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,— (a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent. of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and (b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent. of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). 2[(1A) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets 3[acquired during any previous year exceeds twenty-five crore rupees and such assets are installed on or before the 31st day of March, 2017], then, there shall be allowed a deduction of a sum equal to fifteen per cent. of the actual cost of such new assets for the assessment year relevant to that previous year: 4[Provided that where the installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new assets are installed:] 5[Provided further that] no deduction under this sub-section shall be allowed for the assessment year commencing on the 1st day of April, 2015 to the assessee, which is eligible to claim deduction under sub-section (1) for the said assessment year. (1B) No deduction under sub-section (1A) shall be allowed for any assessment year commencing on or after the 1st day of April, 2018.] (2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) 6[or sub-section (1A)] in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head ―Profits and gains of business or profession‖ of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset. (3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 16 - of 26 company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company. (4) For the purposes of this section, ―new asset‖ means any new plant or machinery (other than ship or aircraft) but does not include— (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; 166 (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head ―Profits and gains of business or profession‖ of any previous year.] (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed73 after the 31st day of March, 2005, by an assessee engaged in the business of manufacture73 or production of any article or thing 74[75[or in the business of generation, transmission or distribution] of power], a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : 76[Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified77 by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words \"twenty per cent\", the words \"thirty-five per cent\" had been substituted :] Section 32 regarding entitlement of depreciation 32. (1) 43[In respect of depreciation of— (i) buildings44, machinery44, plant44 or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature44, being intangible assets acquired on or after the 1st day of April, 1998, 45[not being goodwill of a business or profession,] owned44, wholly or partly, by the assessee44 and used44 for the purposes of the business44 or profession, the following deductions shall be allowed—] Section-32(1)(ii) Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 17 - of 26 ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, Section-43(3) defining plant (3) ―plant‖ includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession 4[but does not include tea bushes or livestock]5[or buildings or furniture and fittings]; Extract of decision of the Hon’ble Apex Court, Scientific Engineering house Pvt Ltd 157 ITR 86 “……13. If the aforesaid test is applied to the drawings, designs, charts, plans, processing data and other literature comprised in the 'documentation service' as specified in clause 3 it will be difficult to resist the conclusion that these documents as constituting a book would fall within the definition of 'plant'. It cannot be disputed that these documents regarded collectively will have to be treated as a 'book', for, the dictionary meaning of that word is nothing but a 'a number of sheets of paper, parchment, etc., with writing or printing on them, fastened together along one edge, usually between protective covers; literary or scientific work, anthology, etc., distinguished by length and form from a magazine, tract, etc' (vide Webster's New World Dictionary). But apart from its physical form the question is whether these documents satisfy the functional test indicated above. Obviously, the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing theodolites and microscopes and there can be no doubt that these documents had a vital function to perform in the manufacture of these instruments; in fact it is with the aid of these complete and up-to-date sets of documents that the assessee was able to commence its manufacturing activity and these documents really formed the basis of the business of manufacturing the instruments in question. True, by themselves these documents did not perform any mechanical operations or processes but that cannot militate against their being a plant since they were in a sense the basic tools of the assessee's trade having a fairly enduring utility, though owing to technological advances they might or would in course of time become obsolete. We are, therefore, clearly of the view that the capital asset acquired by the assessee, namely, the technical know-how in the shape of drawings, designs charts, plans, processing data and other literature falls within the definition of 'plant' and, therefore, a depreciable asset….” 19.0 On the principal controversy of allowance of deduction u/s. 32AC of the Act to the appellant, the first issue that came up for our consideration is as to whether the appellant meets the various criterion Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 18 - of 26 laid down in section 32AC. We have noted that to be eligible for the same the assessee ought to be engaged in manufacturing of an article or thing. This fact is clearly borne from records and Revenue doesn’t contests the same. Further, the assessee ought to have invested a sum of Rs.100 crores between the period 1/4/2013 to 31/3/2015 in its acquisition of a new asset for the new plant and machinery. The assessee placed on records through its paper book, detailed evidences to allude fulfillment of this condition regarding investment of sum of Rs.100 crores between the period 1/4/2013 to 31/3/2015. There is no dispute on this aspect as well. This brings us to the next limb of the dispute as to whether the drawings per se would fall within the definition of “plant” to be eligible for claim of deduction u/s 32AC. We have noted that the word plant has not been is specifically defined in the Act. Section 32AC merely says that an assessee is eligible for deduction of 15% of the amount of investment made by it in an asset which is forming part of it new plant and machinery. The word new asset has been defined in section 32AC(4) stating that new asset means any new plant or machinery. As regards the facts of the present case, the item at hand comprises drawings of BMW Motor Cycles. Thus, the said drawings since certainly not being part of any “machinery” would at best fall into the definition of “plant”. We have noted that section 43 of the Act attempts to define various phrases for the relevance of determination of income Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 19 - of 26 under the head profits and gains of business or profession within the purview of section 28 to 41 of the Act. The definitions contain therein are important since the same are not available in any other part of the Act. Thus, section 43(3) supra provides that “plant” includes “books”. We have also noted that Hon’ble Apex Court in its decision in the case of Scientific Engineering house Pvt Ltd 157 ITR 86 supra have held that books are to be treated as plant for the purposes of grant of depreciation. In the impugned case Hon’ble Apex Court was seized with the question as to whether the assessee therein was entitled to claim depreciation on the library books for which payments were made to a Foreign Collaborator. It was the case of the Revenue therein that the books did not bring to rise any depreciable asset. Hon’ble Apex Court concluded that “….the capital asset acquired by the assessee, namely, the technical know-how in the shape of drawings, designs charts, plans, processing data and other literature falls within the definition of 'plant' and, therefore, a depreciable asset….”. Thus, the Hon’ble Apex Court has laid down the rule that drawings etc would fall within the definition of “plant” as understood in the phrases “plant and machinery” and therefore constitute an depreciable asset. Thus, the assessee meets this limb of suitability also i.e. the drawings on which it is claiming deduction u/s 32AC fall within the definition of plant available therein. Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 20 - of 26 19.1 This brings us to the next issue seminal to the controversy as to whether an assessee who has made a claim of depreciation u/s 32 would be simultaneously also entitled for claim of deduction u/s 32AC. The question that thus rises is as to whether allowance of depreciation u/s 32 on an asset to the assessee, particularly of the intangible variety, would prohibit the assessee from claiming a deduction u/s 32AC. At the outset, we have noted that neither section 32 nor section 32AC anywhere provides that claims made in either of the section would cast a prohibition in making any claim qua the other section. Thus seen as there is no specific prohibition in making simultaneous claims, an assessee is entitled to make a claim of depreciation under section 32 as well as under section 32AC. Section 32 is a generic statute which entitles every taxpayer to make a claim of depreciation subject to fulfillment of certain conditions, inter-alia including, qua ownership and utilization of the asset. This section is applicable to all without any limitations. The statute postulates that every taxpayer while calculating its taxable income in a particular year would be entitled to take the benefit of reduction of an expenditure in the nature of depreciation which is deemed erosion in the value of assets. The law of section 32 postulates that since an asset from the date of its inception / acquisition starts loosing its value year after year, the taxpayer must be compensated qua this loss by allowance Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 21 - of 26 of depreciation. On the contrary section 32AC is a specific provision which was brought on the statute specifically with the object of promoting industrialization in the country. The law of section 32AC thus provided that if a taxpayer makes investments of amount exceeding Rs.100 Crores then, such taxpayer shall be entitled to claim by way of an incentive or a subsidiary or a benefit an amount of 15% of such investment. It is important to note that this benefit was not in the nature of depreciation which gets allowed to a taxpayer year after year and also that such allowance by the Revenue is not subject to any specific claim by the taxpayer. The present law of the land postulates that depreciation to be allowed as per the prescribed rates to a taxpayer even if it is not specifically claimed. Reverting to the position of deduction under section 32AC the provision was brought on statute only for two financial years primarily to meet the or rather to augment the investment prospects in Industrial sectors in the country. 19.2 The question that thus arises is whether both the benefits can be simultaneously availed by a tax payer. Hon’ble Apex court in their several decisions including in the case of Dilip kumar and Company 95 taxman.com 327 have clearly laid down that if the statute is unambiguously clear then the benefits cannot be denied to a taxpayer. In the present controversy we have noted that there is no bar for Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 22 - of 26 prohibition in simultaneously claiming the twin deductions available u/s 32 & 32AC. The Revenue has argued that because the assessee has claimed a special rate of depreciation in respect of intangible assets therefore it cannot claim the deduction u/s 32AC. The Revenue has also argued that the deduction u/s 32AC is not available in respect of intangible assets. We have discussed herein above that merely because taxpayer is entitled for special rate of depreciation in respect of intangible assets it would not disentitle it to make a claim of the deduction u/s 32AC. We have also discussed that drawings which are part of assessee’s claim have been held to be a depreciable asset by the Hon’ble Supreme Court in their decision in the case of Scientific Engineering Pvt Ltd Supra. Accordingly, we are of the considered view that there is no infirmity in the claim of the assessee qua deduction available to it u/s 32AC. We are of the view that the addition made by the Ld.AO and its confirmation by the Ld.CIT(A) is not based upon correct understanding and interpretation of the facts of the case as well as accompanying statute. We therefore set aside the order of lower authorities and direct the Ld.AO to allow the assessee its claim of deduction u/s 32AC of Rs.2,75,60,290/-. Accordingly, all the grounds of appeal raised by the assessee on this issue are allowed. 20.0 The next issue raised by the assessee is regarding the denial of its claim of additional depreciation u/s 32(1)(iia) of Rs.3,67,47,054/- being Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 23 - of 26 20% of the asset value of Rs.18,77,35,270/-, which was made during the course of assessment proceedings. The assessee had claimed before the Ld.AO that it had omitted to claim the impugned depreciation in its Return of Income. The Ld.AO rejected the claim by applying the decision of Hon’ble Apex Court in the Goetz India. The assessee had argued that it is entitled for allowance of its claim within the meanings of explanation-5 to section 32 of the Act postulating that an assessee is entitled for an allowance of depreciation whether or not it was claimed in the Return of Income. It was accordingly requested that the Ld.AO may be directed to allow the assessee’s claim of additional depreciation. 21.0 Per contra, the Ld.DR relied upon the order of lower authorities. 22.0 We have heard the rival submissions in the light of material available on records. We have noted that the Ld.AO has denied the claim by placing reliance upon the decision of Hon’ble Apex Court in the case of Goetz India. As regards assessee’s claim of additional depreciation, the Ld.CIT(A) on page 43 of his order held that claims made in the Return of Income can only be considered for allowance. He has further proceeded to hold that the assessing officer does not have any power to entertain any claims not made in the Return of Income and further that the CIT(A) enjoys only those powers which are available to an assessing officer. We have noted that the Ld. AO holds the view that in view of Hon’ble Apex Court’s decision in the case of Goetze India Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 24 - of 26 assesse’s claim cannot be accepted. The Ld. First appellate authority has concurred with the views of the Ld. AO. The question that thus emerges is whether Hon’ble Apex Court’s decision in the case of Goetze India would be applicable or not. At this stage it is necessary to examine the ratio laid down by their Lordships in the case of Goetze India Supra reproduced herein below:- “…. The question raised in this appeal relates to whether the appellant assesse could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30-11-1995, by the appellant for the assessment year in question. On 12-1-1998, the appellants ought to claim a deduction by way of a letter before the assessing officer. The deduction was disallowed by the assessing officer on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. 3. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal. 4. The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. There shall be no order as to costs…..”. 23.0 A plain reading of the above shows that no doubt their Lordship have mandated that claims of the assesse cannot be entertained by the Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 25 - of 26 Ld. AO, which are made otherwise then through a return of income – original or revised, however they have excluded consideration of such claims made before the tribunal. Thus, a tribunal would be well within its rights to consider entertaining such claims. The claim of the assesse is therefore accordingly considered. We are inclined to accept the contentions of the Ld. AR that explanation-5 to section 32 available on statute w.e.f. 01.04.2002 provides that deduction on account of depreciation would be available to taxpayer whether or not the same has been claimed by him in computing the total income. We have also noted that Hon’ble Apex Court in the case of Goetze India have held that the tribunal is well within its powers to admit a claim of tax payer which was not claimed through Return of Income including a revised one. We have also noted that the impugned intangible asset are a part of plant and machinery as well as confirm to the prescription of block of asset defined in section 2(11) of the Act. The claim of assessee is therefore admitted for consideration. Accordingly, we set aside the order of lower authorities and direct the Ld AO to reexamine the claim of assessee afresh in accordance with law , after giving due opportunity of being heard and by passing a speaking order. The assessee shall be bound to comply with all the statutory notices issued in this regard. All the grounds of appeal raised by the assessee on the issue of additional depreciation are therefore allowed for statistical purposes. Printed from counselvise.com IT(TP)A No.67 & ITA 2405/Chny/2019 Page - 26 - of 26 24.0 In the result, the appeal of the Revenue and the assessee are decided as under:- ITA Nos Assessment Year Result IT(TP)A No. 67 / Chny / 2019 2014-15 Dismissed ITA No. 2405 / Chny / 2019 2014-15 Partly Allowed Order pronounced on 13th , Aug -2025 at Chennai. Sd/- (एबी टी. वर्की) (ABY T VARKEY) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 13th , Aug -2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF Printed from counselvise.com "