MILES INDIA LTD. (NOW, BAYER DIAGNOSTICS INDIA LTD.) vs. DY.C.I.T. (ASST.)

Facts

The assessee, Miles India Ltd. (now Bayer Diagnostics India Ltd.), filed its return for assessment year 1992-93 on 31.12.1992, declaring a total income of Rs. 87,80,970/-. The return was processed under Section 143(1)(a) and later scrutinized under Section 143(3). The Assessing Officer passed an order, against which the assessee appealed to the CIT(Appeals). The CIT(Appeals) partly allowed the appeal. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT), which also partly allowed the appeal via an order dated 05.09.2002. The present appeal is filed by the assessee against the ITAT's order.

Held

The High Court held that the Tribunal ought to have granted the benefit to the assessee under Section 80I of the Income Tax Act for assessment year 1992-93. The Court reasoned that in previous years, the assessee had claimed and was granted the benefit of Section 80I, and this fact was also acknowledged before the Assessing Officer. The Court relied on the principle laid down in CIT v. Excel Industries Ltd., where the Apex Court held that the department cannot 'flip flop' on an issue and should let the matter rest if it accepted favourable orders in previous years. The Court also referred to CIT v. International Data Management Ltd., where the Bombay High Court held that income from services and maintenance facilities, having a direct nexus with the main business activity, was eligible for deduction under Section 80I. Therefore, the appeal was allowed, and the substantial question of law was answered in favour of the assessee.

Key Issues

1. Whether income derived from service/maintenance contracts in respect of goods manufactured and supplied by an industrial undertaking is eligible for deduction under Section 80I of the Income Tax Act? Assessee's contentions: - The Tribunal erred in not granting the deduction under Section 80I for assessment year 1992-93, as similar relief was granted in previous years (1989-90 and 1990-91) and this fact was ascertained before the Assessing Officer. - Relied on the Supreme Court decision in CIT v. Excel Industries Ltd. and the Bombay High Court decision in CIT v. International Data Management Ltd. Revenue's contentions: - The Tribunal, after appreciating the material on record, passed the impugned judgment and order. - There is no reason to interfere with the Tribunal's order.