Miles India Ltd. (now, Bayer Diagnostics India Ltd.) V. Dy.C.I.T. (Asst.)

TAXAP/27/2003

AI Insights

The case involves Miles India Ltd. (now Bayer Diagnostics India Ltd.), the appellant, contesting the Income Tax Appellate Tribunal's decision which partly allowed their appeal regarding the deduction under Section 80I of the Income Tax Act for the assessment year 1992-93. The primary legal question was whether income from service and maintenance contracts related to manufactured goods qualifies as income derived from an industrial undertaking, thus eligible for deduction under Section 80I. The High Court examined the consistency of the Tribunal's decision with past assessments and relevant judicial precedents.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 687992 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 23-12-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Excel Industries Ltd., Commissioner of Income Tax v. International Date Management Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K M PARIKH
• Assessee Lawyers: MANISH SHAH; J P SHAH
• Keywords: Assessment Year; Deduction; Income Tax; Industrial Undertaking; Tribunal; Service/Maintenance Contracts
• Section: 143(3); 80I; 143(a)(a)

Judgement Text

"O/TAXAP/27/2003 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 27 of 2003 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ MILES INDIA LTD. (NOW, BAYER DIAGNOSTICS INDIA LTD.)....Appellant(s) Versus DY.C.I.T. (ASST.)....Opponent(s) ================================================================ Appearance: MR. MANISH SHAH, ADVOATE WITH MR JP SHAH, ADVOCATE for the Appellant(s) No. 1 MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 23/12/2014 Page 1 of 6 O/TAXAP/27/2003 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant- assessee has challenged the judgment and order dated 05.09.2002 passed by the Income Tax Appellate Tribunal [ for short “the Tribunal”] in ITA No. 1493/Ahd/1996, whereby the appeal filed by the assessee was partly allowed by the Tribunal. 2. The facts, in brief, are that the assessee had filed its return on 31.12.1992 for the assessment year 1992-93, declared total income of Rs.87,80,970/-. Thereafter, the return was processed under Section 143(a)(a) of the Income Tax Act. After scrutiny, the Assessing Officer passed his order under Section 143(3) of the Income Tax Act. Against the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) partly allowed the said appeal for statistical purposes. 2.1. Being aggrieved and dissatisfied with the order of the CIT(A), the assessee filed an appeal before the Tribunal. The Tribunal vide impugned order dated 05.09.2002 partly allowed the appeal of the assessee. Hence, this appeal is filed at the instance of the assessee. Page 2 of 6 O/TAXAP/27/2003 JUDGMENT 3. While admitting this appeal on 17.02.2003, the Court had formulated the following substantial question of law:- “Does the Income derived from an industrial undertaking include income from service/maintenance contracts in respect of the goods manufactured and supplied by the industrial undertaking so as to be eligible for deduction under section 80I of the Income Tax Act“ ? 4. Mr. Shah, learned advocate for the appellant-assessee has contended that the Tribunal has failed to appreciate the fact that in previous years Section 80I relief was granted to the assessee in respect of service charges, and therefore, it ought to have been granted in this year also. He further submitted that the aforesaid fact has already been ascertained before the Assessing Officer. 4.1. He further contended that in the assessment Years 1989-90 and 1990-91, similar relief was claimed by the assessee. Therefore, he submitted that the Tribunal has committed error in not granting the relief under Section 80I of the Income Tax Act for the assessment Year 1992- Page 3 of 6 O/TAXAP/27/2003 JUDGMENT 93. 4.2. Learned advocate for the appellant has relied upon the decision of the Apex Court in the case of commissioner of Income Tax v. Excel Industries Ltd., reported in [2013] 358 ITR 296] and the decision of the Bombay High Court in the case of Commissioner of Income Tax v. International Date Management Ltd., reported in [2003] 261 ITR 177. 5. Learned advocate for the respondent- revenue has supported the impugned judgment and order of the Tribunal and submitted that the Tribunal after appreciating the material on record has passed the impugned judgment and order. Therefore, he urged that there is no germane reason to interfere with the impugned judgment and order of the Tribunal. 6. We have heard learned advocate for the parties and perused the material on record. It appears from the record that in previous years also, the assessee had claimed for the benefit of Section 80-I of the Income Tax Act and the same was granted to the assessee. Further, it appears that before the Assessing Officer, the assessee also ascertained the aforesaid fact, which is evident from the Assessment Order, wherein it has Page 4 of 6 O/TAXAP/27/2003 JUDGMENT been mentioned that “It was also claimed that as the amount has been allowed in the past for the sake of uniformity it should be allowed in this year also. The assessee relied on the Bombay High Court’s decision in the case of CIT Vs. Buckau Wolk New India Engg. Works, reported in 160 ITR 180...” 7. The Apex Court in the case of Excel Industries Ltd. (supra) held that in several assessment Years, the Department accepted the order of the Tribunal in favour of the assesse and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the High Court. The Department could not be allowed to flip flop on the issue and it ought let the matter rest rather than pursue litigation. 8. The Bombay High Court in the case of International Data Management Ltd. (supra) held that the assessee derived income as it rendered services and maintenance facility to its clients for which it charged for maintenance and services. Therefore, there was a direct nexus between the receipts from rendering services and maintenance facility to its clients and lease rent and the main business activity of the assessee. There was also recorded as a finding of Page 5 of 6 O/TAXAP/27/2003 JUDGMENT fact by the Tribunal. The assessee was entitled to deduction under Section 80I in respect of that income. 9. Considering the facts of the case and also considering the principle laid down in the case of Excel Industries Ltd. (supra) and International Date Management Ltd. (supra), we are of the considered opinion that the Tribunal ought to have granted the benefit to the assessee under Section 80I of the Income Tax Act for the assessment Year 1992-92 also. 10. In view of th above, the present appeal deserves to be allowed and the same is accordingly allowed. The question of law raised in this appeal is answered in negative i.e. in favour of the assessee and against the revenue. Therefore, we hold that the assessee is eligible for deduction under section 80I of the Income Tax Act. (K.S.JHAVERI, J.) (K.J.THAKER, J) pawan Page 6 of 6 "