Commissioner Of Income Tax, Chandigarh v. Chandigarh Bottling Co., Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITR No.5 of 2001 Date of decision: 30.9.2010 Commissioner of Income tax, Chandigarh -----Petitioner Vs. Chandigarh Bottling Co., Chandigarh ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Urvashi Dhugga, Advocate for the revenue.--- Adarsh Kumar Goel,J. 1.Following questions of law have been referred for opinionof this Court by the Income Tax Appellate Tribunal, Chandigarh,arising out of its order dated 7.3.1989 in ITA No.27/Chandi/86 for theassessment year 1980-81:- “1. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in law in upholdingthe findings of CIT(A) that the new empty bottles of theassessee were a plant and therefore depreciation @ 100% isallowable on the new empty bottles purchased during theyear since the value of each bottle is less than Rs.750/-? 2. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right in law and on factsin allowing 15% depreciation on old empty bottles/shells? 3. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal was right on facts and in lawthat the security deposits from the customers/dealersagainst the bottles does not constitute trading receipts ofthe assessee?” 2. It is not disputed that in the case of the assessee itself, thisCourt has dealt with the issue involved in Question Nos. 1 and 2 in ITANo.6 of 2001 (The commissioner of Income Tax, Chandigarh v. M/sChandigarh Bottling Co. Chandigarh) decided on 20.11.2007 andheld that bottles used by soft drinks manufacturer constitute plant and100% depreciation is allowed thereon if value of each bottle is less thanRs.750/-. Accordingly, the said questions are answered against therevenue and in favour of the assessee. 3.On question No.3, finding recorded by the Tribunal is asunder:- “We have considered the rival submission as also thedecisions referred to above. In the case of PunjabDistilling Inds. Limited (supra) the facts were quitedifferent. There was scarcity of bottles of liquor after thewar. In order to relieve that scarcity the Govt. devised ascheme whereby the distiller was entitled to charge thewholesaler a price for the bottles in which the liquor wassupplied at rates fixed by the Govt. which he was boundto repay when the bottles were returned. In addition tothe price fixed the assessee took from the wholesalerscertain further amounts described as security depositswhich were returned as and when the bottles werereturned. The Hon’ble Supreme Court held on those 3.On question No.3, finding recorded by the Tribunal is asunder:- “We have considered the rival submission as also thedecisions referred to above. In the case of PunjabDistilling Inds. Limited (supra) the facts were quitedifferent. There was scarcity of bottles of liquor after thewar. In order to relieve that scarcity the Govt. devised ascheme whereby the distiller was entitled to charge thewholesaler a price for the bottles in which the liquor wassupplied at rates fixed by the Govt. which he was boundto repay when the bottles were returned. In addition tothe price fixed the assessee took from the wholesalerscertain further amounts described as security depositswhich were returned as and when the bottles werereturned. The Hon’ble Supreme Court held on those facts that the security deposits amounted to tradingreceipts. In the present case the bottles were not sold. Infact the terms and conditions a copy of which has beenfiled by the assessee on the paper book clearly spell outthat the bottles and cases printed or marked with theassessee’ company’s name or trade mark were to remainthe property of the assessee and a charge against suchbottles or cases being in the nature of a deposit merelyensured the return of the goods and did not amount tosale. The conditions further provided that the depositswere to be refunded by the assessee on return of suchbottles and cases in good condition. Therefore, thesecurity deposits did not constitute a trading receipts inthe hands of the assessee and it was merely a depositobtained from the constituents in order to ensure thereturn of the empties. The decision in the case of thePunjab Distilling Inds. Limited (supra) does nottherefore assist the department. Infact the facts in 29ITR (Trib) (supra) accord with the facts in the case ofthe assessee. We therefore find no force in this ground.Incidentally the same view was held by a special benchof the Appellate Tribunal in the case of DetectiveDevices (P) Limited v. ITO (1987) 22 ITR 9. (Hyd.Special Bench) where the assessee company was adealer in liquidation gases and supplied cylinders to thecustomers. It was held in that case that the depositsconstituted borrowed money which could not be taxedas trading receipts.” 4. The above finding of fact clearly shows that in the facts and circumstances of the present case, the security deposits from thecustomers did not constitute trading receipts of the assessee and judgment of the Hon’ble Supreme Court in Punjab Distilling Inds. Limited v. CIT (1959) 38 ITR 619 was rightly distinguished.Accordingly, the question is answered against the revenue and infavour of the assessee.5.The reference is disposed of. (Adarsh Kumar Goel) Judge September 30, 2010‘gs’ (Ajay Kumar Mittal) Judge