2014 (12) TMI 1354 - HC - Income Tax

Court Allows Appeal for Section 80I Deduction: Income from Service Contracts Eligible

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

The Court allowed the appeal in favor of the assessee, affirming their eligibility for deduction under Section 80I of the Income Tax Act for the ... Deduction u/s 80I - 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 ? - HELD THAT:- The Apex Court in the case of Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] held that in several assessment Years, the Department accepted the order of the Tribunal in favour of the assessee 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. The Bombay High Court in the case of International Data Management Ltd. [2003 (2) TMI 50 - BOMBAY HIGH COURT] 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 fact by the Tribunal. The assessee was entitled to deduction under Section 80I in respect of that income. Considering above 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. - Decided in favour of assessee. Issues:- Challenge to Tribunal's order on Section 80I relief eligibility for industrial undertaking income from service/maintenance contracts.Analysis:1. The appellant challenged the Tribunal's order dated 05.09.2002 regarding the eligibility for Section 80I relief under the Income Tax Act for income derived from service/maintenance contracts related to goods manufactured and supplied by the industrial undertaking.2. The appellant filed its return for the assessment year 1992-93, declaring total income. The Assessing Officer passed an order under Section 143(3) after scrutiny. The Commissioner of Income Tax (Appeals) partly allowed the appeal, leading to the appellant's appeal before the Tribunal, which partially allowed it.3. The substantial question of law formulated was whether income from service/maintenance contracts related to goods supplied by the industrial undertaking is eligible for Section 80I deduction. The appellant argued that relief under Section 80I had been granted in previous years for similar charges and cited relevant case law.4. The respondent supported the Tribunal's decision, stating that the Tribunal had correctly appreciated the material on record. The Court noted that in previous years, the appellant had been granted Section 80-I benefits, and the Assessing Officer had acknowledged this fact.5. Referring to the Supreme Court's decision in Excel Industries Ltd. and the Bombay High Court's decision in International Date Management Ltd., the Court held that there was a direct nexus between the income from service contracts and the main business activity of the assessee, making them eligible for Section 80I deduction.6. Based on the principles established in the aforementioned cases and the facts of the present case, the Court concluded that the Tribunal should have granted the benefit of Section 80I for the assessment year 1992-93. Consequently, the appeal was allowed in favor of the assessee, affirming their eligibility for deduction under Section 80I of the Income Tax Act.