NECTAR BEVERAGES PVT. LTD. vs. DEPUTY COMMNR. OF INCOME TAX

C.A. No.-005291-005291 - 2004Supreme Court06 July 200913 pages
For Petitioner: RAJAN NARAINFor Respondent: RR-EX-PARTE
AI SummaryAllowed

What did the Supreme Court hold?

The Tribunal held that the concept of 'balancing charge' under Section 41(2) could not be read into Section 41(1). Depreciation is not considered 'expenditure' for the purposes of Section 41(1). Therefore, sale proceeds of fully depreciated assets were not taxable under Section 41(1).

What were the facts?

The assessee claimed 100% depreciation on bottles and crates costing less than Rs. 5,000. When these assets were sold, the department sought to tax the sale proceeds under Section 41(1) as recoupment of expenditure, despite Section 41(2) (dealing with balancing charge) being deleted. The core issue was whether depreciation could be considered 'expenditure' under Section 41(1).

What were the issues?

Whether sale proceeds of fully depreciated assets (bottles and crates) are taxable under Section 41(1) after the deletion of Section 41(2). Whether depreciation can be considered 'expenditure' for the purpose of Section 41(1).

Which sections of the Income-tax Act were involved?

Section 41(1),Section 41(2),Section 32(1)(ii)

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Cause title — parties, addresses and appearances
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 5291 of 2004 Nectar Beverages Pvt. Ltd. … Appellant(s) versus Deputy Commissioner of Income Tax … Respondent(s) With Civil Appeal Nos. 5296/04, 5293/04, 356-357/06, 359-360/06, 361-362/06, 363-364/06, 5858/06, 108/07, Civil Appeal No. 4130/09 @ S.L.P. (C) No. 1613/08, Civil Appeal No.4131/09 @ S.L.P. (C) No. 3064/09 and Civil Appeal No. 4132/09 @ S.L.P. (C) No. 8002/09.

J U D G M E N T S.H. KAPADIA, J. Leave granted.

2.

In this batch of Civil Appeals, pertaining to assessment years 1990-91 to 1998-99, the question which arises for determination is: whether the concept of “balancing charge” in Section 41(2) could be read into Section 41(1) of the Income Tax Act, 1961?

3.

In this batch of civil appeals the lead matter is the case of Nectar Beverages Pvt. Ltd. v. Dy. CIT ( Civil Appeal No. 5291/04) in which the facts are as follows.

4.

In the Lead Matter, the assessee who is the manufacturer of soft drinks, purchased bottles and crates, each item of which costed less than Rs. 5,000/- and, therefore, was entitled to and allowed 100% depreciation on the cost of the s

The order continues below.

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