2003 (3) TMI 41 - HC - Income Tax

Deduction u/s 80-I - issue involved in the appeals is as to whether the assessee engaged in the business of printing of lottery tickets can be said to be an industrial undertaking engaged in the manufacture or production of articles or things and therefore entitled to deduction under section 80-I - When there is no change in the business of the assessee relief under section 80-I of the Act can be denied to them in respect of some of the assessment years when similar relief is granted for previous and subsequent years. Having accepted at least in three assessment years that the assessee s business activity fell within the ambit of section 80-I of the Act the Revenue cannot be allowed to now turn around and contend that deduction under the said section is not available to them in respect of the present AYs - without going into the merits of the issue raised we decline to entertain the appeals on this short ground.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Court was whether the assessee, engaged in the business of printing lottery tickets, qualifies as an industrial undertaking engaged in the manufacture or production of articles or things, thereby entitling it to claim deduction under section 80-I of the Income-tax Act, 1961 ("the Act"). The appeals arose from the Revenue's challenge to the Income-tax Appellate Tribunal's (Tribunal) orders granting such deduction for certain assessment years. Additionally, the Court considered whether the Revenue could be permitted to adopt a different stance in subsequent assessment years after having accepted the assessee's entitlement to deduction under section 80-I in earlier and later years, despite the general principle that each assessment year is independent.

2. ISSUE-WISE DETAILED ANALYSIS

Issue: Entitlement to Deduction under Section 80-I of the Act for Printing Lottery Tickets Business

Relevant Legal Framework and Precedents: Section 80-I of the Income-tax Act grants deduction to industrial undertakings engaged in manufacture or production of articles or things. The critical question was whether the printing of lottery tickets constitutes manufacture or production within the meaning of this provision.

Court's Interpretation and Reasoning: The Court noted that neither the assessment orders nor the Tribunal's orders contained any detailed discussion on this issue. The Assessing Officers rejected the claim merely by referring to earlier disallowances, while the Tribunal upheld the deduction relying on its earlier rulings, particularly for the assessment year 1992-93. The Court did not delve into the merits of whether printing lottery tickets amounts to manufacture but focused on the consistency of the Revenue's approach across assessment years.

Key Evidence and Findings: The Tribunal had, in the assessment year 1992-93, ruled in favour of the assessee's entitlement to deduction under section 80-I. This order was not challenged by the Revenue. For subsequent years (1995-96 and 1997-98), the Revenue also did not challenge the Tribunal's orders granting the deduction. The Assessing Officers in the present appeals disallowed the deduction only on the ground that it was disallowed in earlier years, without any fresh material or change in the nature of the business.

Application of Law to Facts: The Court acknowledged the general principle that each assessment year is independent and that res judicata or estoppel by record does not strictly apply to income tax proceedings. However, it emphasized the importance of consistency and finality in litigation, including fiscal matters. The Court relied on the Supreme Court's decision in Radhasoami Satsang v. CIT, which held that where a fundamental aspect remains unchanged and parties have acquiesced to a particular position by not challenging earlier orders, it is inappropriate to reopen the issue in subsequent years.

Treatment of Competing Arguments: The Revenue argued that since the issue was legal in nature and the principle of res judicata does not apply, the appeals should be entertained. The assessee contended that the Revenue had accepted the deduction for multiple years without challenge, and no change in business activity justified a different stance. The Court found the assessee's argument persuasive, emphasizing judicial economy and finality.

Conclusions: The Court held that the Revenue could not be permitted to take a contrary position in the present assessment years after having accepted the deduction in earlier and later years without any change in facts or business nature. The appeals were dismissed without examining the substantive merits of whether printing lottery tickets is manufacturing under section 80-I.

3. SIGNIFICANT HOLDINGS

"For the sake of consistency and for the purpose of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reopened unless some fresh facts are found in the subsequent year."

"Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year."

"Having accepted at least in three assessment years that the assessee's business activity fell within the ambit of section 80-I of the Act, the Revenue cannot be allowed to now turn around and contend that deduction under the said section is not available to them in respect of the present assessment years."

"The apex court has also deprecated the practice of the Department in accepting the correctness of a judgment on a particular issue in one case and challenging its correctness in another case."

The Court established the principle that while each assessment year is independent, repeated acceptance of a legal position by the Revenue in multiple years without challenge and without any change in facts or business nature creates a binding effect for the purposes of consistency and finality. The Revenue's attempt to adopt a contrary stand in certain years was rejected on this ground alone.