2004 (10) TMI 58 - HC - Income Tax

Depreciation - 100% depreciation on purchase of bottles and crates - Deposits received by the respondent/assessee from the agents and retailers In respect of depreciation, held that each bottle was an independent unit and was not dependent for its user on the availability of other bottles whether empty or filled. The use of one bottle was not interconnected with the use of other bottles. Since each bottle was an individual unit and all bottles together did not constitute a single integrated unit depreciation under the proviso to section 32(1)(ii) is allowable In respect of deposits, Revenue contention that the empty bottles return security deposits received from the agents and retailers are trade receipts, is liable to be rejected and the said amount is not taxable in the hands of the assessee. The Tribunal was, therefore, right in holding that the security deposits received from the agents and the retailers are not taxable in the hands of the assessee.

Summary

Issues:
1. Entitlement to 100% depreciation on purchase of bottles and crates.
2. Taxability of security deposits received from agents and retailers.

Analysis:
1. Entitlement to 100% depreciation on purchase of bottles and crates:
The appellant/Revenue contested the entitlement of the respondent/assessee to 100% depreciation on bottles and crates. However, the court referred to precedents such as First Leasing Co. of India Ltd. v. CIT and CIT v. Aqueous Victuals P. Ltd., where it was established that each bottle was an independent unit eligible for depreciation. The court emphasized that complexity should not be introduced where matters can be straightforwardly dealt with. The decision was supported by the apex court's confirmation of the Andhra Pradesh High Court's ruling. Consequently, the court upheld the Tribunal's decision that crates and bottles are entitled to 100% depreciation.

2. Taxability of security deposits received from agents and retailers:
The appellant/Revenue argued that the security deposits received by the assessee should be treated as trading receipts and taxed based on the precedent set by CIT v. Punjab Distilling Industries Ltd. The court examined the nature of the deposits in the context of previous judgments, including CIT v. Madurai Soft Drinks (P.) Ltd. and CIT v. Goyal Gases P. Ltd. It differentiated the present case from Punjab Distilling Industries Ltd., emphasizing that the security deposits did not form part of the sale transaction. The court concluded that the security deposits were not taxable income in the hands of the assessee. The decision aligned with previous rulings and rejected the appellant's contention, affirming that the security deposits were not taxable.

In conclusion, the court dismissed the appeal, finding no substantial question of law for consideration based on the analysis of both issues.