COMMISSIONER OF INCOME TAX vs. GANDHINAGAR BOTTLING PVT.LTD.

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ITR/32/1995HC GujaratGJHC24022357199516 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH3 pages
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What did the High Court hold?

The High Court held that the Appellate Tribunal was correct in law and on facts in directing the Income Tax Officer to allow depreciation at the rate of 100% on bottles and crates, treating them as plant. The Court relied on its own prior decision in Commissioner of Income-tax v. Saurashtra Bottling Pvt. Ltd. (1998) 232 ITR 270. In that case, the Division Bench had ruled that bottles and crates, which remain the property of the assessee and are indispensable for carrying on the business of manufacturing soft drinks, function as tools and instruments essential for achieving the business objectives. Therefore, they are to be considered as 'plant'. The reference was answered in favour of the assessee.

What were the facts?

The assessee, Gandhinagar Bottling Pvt. Ltd., engaged in the business of bottling and supplying soft drinks, filed a return for Assessment Year 1983-84 declaring a loss. The Assessing Officer (AO) finalized the assessment, determining the loss at Rs. 10,61,220. A key adjustment was the disallowance of the assessee's claim for 100% depreciation on bottles and crates amounting to Rs. 13,03,025. The assessee contended that these items constituted 'plant' and, with individual costs below Rs. 750, were fully deductible. The CIT(A) allowed the claim, a decision upheld by the Income Tax Appellate Tribunal. The Revenue has filed this reference before the High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in directing the Income Tax Officer to allow depreciation at the rate of 100% on bottles and crates treating them as plant, under Section 32(1)(ii) of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that bottles and crates used in its soft drink business qualify as 'plant'. Furthermore, as the cost of each item was less than the prescribed threshold of Rs. 750 in the relevant previous year, the actual cost of each item was deductible. Revenue's Contention: The Revenue disputed the classification of bottles and crates as 'plant' and consequently the eligibility for 100% depreciation. The judgment does not explicitly record the Revenue's specific arguments beyond this, but it is implied they challenged the Tribunal's finding.

Which sections of the Income-tax Act were involved?

Section 32(1)(ii)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 32 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus GANDHINAGAR BOTTLING PVT.LTD. -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner MR SN SOPARKAR for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 16/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL)

At the instance of Revenue, the Income Tax Appellate Tribunal has referred following question of law for opinion of this Court in respect of Assessment Year 1983-84 :

"Whether the Appellate Tribunal is right in law and on facts in directing the I.T.O. to allow depreciation at the rate of 100% on bottles and crates treating them as plant ?"

2.

The assessee company was doing the business of bottling and supplying soft drinks. For the previous year comprised of C.Y. 1982, the assessee company filed return of income declaring a loss of Rs. 27,32,430/-. In the assessment finalised under section 143(3), the assessing officer determined the loss at Rs. 10,61,220/and one of the adjustments made was that the assessee's claim of 100% depreciation under section 32(1)(ii) on bottles and crates to the tune of Rs. 13,03,025/- was not allowed. The assessee claimed that for its business of bottling and supplying soft drinks, the bottles and crates constituted plant and each of them had a cost less than the amount prescribed under the previous relevant year i.e. Rs. 750/- and hence the actual cost of each of them was deductible. The C.I.T.(A) accepted the claim. On departmental appeal, the Tribunal upheld the decision taken by the C.I.T.(A)

3.

We have heard the learned counsel for the parties. The learned counsel for the parties state at the Bar that the point involved in the Reference is concluded by the decision of Division Bench of this Court in Commissioner of Income-tax v. Saurashtra Bottling Pvt. Ltd. (1998) 232 ITR 270. In the said decision, the Division Bench has taken the view that bottles and crates remain in ownership of assessee and without them, it is impossible to carry on business of manufacturing soft drinks and, therefore, are tools and instruments to attain purposes of business of assessee.

4.

In view of the above referred to decision, the Reference is answered in favour of the assessee and against the Revenue. The Reference accordingly stands disposed of, with no order as to costs.

(J.M.Panchal, J.)

( M.S.Shah, J. )

(patel)

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