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TMI Blog1991 (3) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... h returnable bottle containing the Beverage and for each bottle container delivered to retailers such deposits as the Corporation may fix from time to time, and to make all reasonable, diligent efforts to recover all empty returnable bottles and cases, and upon recovery thereof to refund or to credit the deposits for such bottles and cases returned undamaged and in good condition." 4. It appears that the amount of the deposits thus collected by the assessee was more than the cost of bottles and shells. The cost of bottles and shells as on1-1-1981i.e., beginning of the accounting year relevant to assessment year 1982-83, was Rs. 16,31,656. The assessee claimed some stock scrap at Rs. 13,844 and thus worked out the cost of bottles and shells as on1-1-1981at Rs. 16,17,812. As against the aforesaid cost of bottles and shells, the assessee had collected security deposits as on1-1-1981amounting to Rs. 20,88,776. In other words, the security deposits in excess of the cost of bottles and shells were of the order of Rs. 4,70,964. The above position stands illustrated by the details filed by the assessee at page 7 of its compilation, which are extracted below : "Details of working of Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing activity of the company had stopped quite some time back and the bottles and shells had not been returned, he was of the view that the security deposits received by the assessee did not represent a liability any longer. As the difference of Rs. 4,70,964 was over and above the cost of bottles and shells and that amount was charged along with the sales of soft drinks, the assessing officer held that the excess security deposit represented a trading receipt. Negativing the claim of the assessee in this regard, the assessing officer brought the aforesaid amount of Rs. 4,70,964 to tax. 8. The assessee appealed to the CIT (Appeals) who observed that the assessee acquired bottles and shells in the course of its business ; these bottles and shells were used for the purpose of business ; these were given to the dealers against security deposits and hence the deposits were obtained in the course of carrying on of the business activities of the assessee. He accordingly held that the amount written back by the assessee was clearly business income assessable in the hands of the assessee under section 28(iv) read with section 2(24)(va) of the IT Act, 1961. He accordingly, reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out that for a couple of years, the assessee had given the factory premises on lease. In this regard, it was pointed out that a sum of Rs. 3,00,000 was received by the assessee as licence fee in the year relevant to assessment year 1981-82. It was, therefore, argued that the assessee had waited for a reasonable period of time and only then written back the aforesaid amount of Rs. 4,70,964. It was also submitted that in a matter like this, only unilateral action was possible which was resorted to by the assessee. It was submitted that the forfeiture of Rs. 4,70,964 clearly amounted to a trading receipt and since the cause of action had arisen in the year relevant to assessment year 1982-83, the assessing officer had correctly assessed the aforesaid amount in assessment year 1982-83. Relying on the provisions of sections 2(24)(va) and 28(iv) of the Act, it was submitted that this was a benefit received by the assessee-company during the year under consideration and was rightly taxed in assessment year 1982-83. 12. We have carefully considered the rival submissions as also the facts on record. We may mention that the question of assessability or otherwise of the cost of bottles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 686 (All.), the assessee transferred an amount of Rs. 18,295 to its P L A/c in the previous year relevant to assessment year 1957-58. This amount was mainly composed of refunds of customs and other duties paid on behalf of its customers and the surplus remaining after paying transit insurance of customers. The Allahabad High Court held that though the amounts were not income when these were received, when these were not claimed by the customers and the assessees chose to treat the items as its income, it could not be said that the income-tax authorities committed an error in accepting the statement of the assessee. The amount of Rs. 18,295 was held assessable as income of the assessee for the assessment 1957-58. 17. In the case of CIT v. Agarpara Co. Ltd. [1986] 158 TR 78 (Cal.), the facts were that the assessee had made provision for bonus. The amount of bonus remained undrawn for a long time. The assessee wrote back the aforesaid amount in its books. On these facts the Calcutta High Court held that once bonus has been offered by the employer, but remained undrawn, it could not be said that the liability subsisted even after expiry of the time prescribed by the Statute, parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L A/c, it became a trading receipt in the hands of the assessee. 20. It may be recapitulated even at the cost of repetition that the assessee had stopped manufacturing or bottling activity for quite some time. For a couple of years, the premises of the assessee along with plant and machinery were given on lease. The factory remained on lease uptil assessment year 1981-82. The assessee waited for another year or so and passed the entry crediting the P L A/c with a sum of Rs. 4,70,964 only on31-12-1981. During this period, the bottles and shells which had to be returned in "good and acceptable condition" along with "the relevant debit note" were not returned at all. We asked the Learned Counsel for the assessee whether during the period from 1981 till date, the retailers had returned the bottles and shells and claimed the security deposits. Shri Ganesan informed us that there was no such case of return of bottles and shells and that nobody had come forward to claim the security deposits. This amply demonstrated the fact that when the assessee chose to forfeit the aforesaid amount of Rs. 4,70,964, it was pretty sure that nobody was ever going to claim the aforesaid amount. 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be argued that the amounts reached the assessee not as perquisite or benefit of the assessee, but on account of the constituents or others to whom the amounts really belonged and the assessee was not accountable for the same. In the instant case, however, the position is quite different. The excess amount of security deposits was lying with the assessee. The retailers were to return the bottles and shells and only then claim the security deposits. The security deposit was in excess of the cost of bottles and shells. Thus, the excess which remained with the assessee and which the assessee rightly chose to forfeit in the year relevant to assessment year 1982-83, became its income for that year. The assessee has certainly been enriched to the extent of Rs. 4,70,964. 24. Now, we come to the case law relied upon by the learned counsel for the assessee. In the case of A.V.M. Ltd. the assessee was carrying on business as a distributor of cinematograph films. It gave positive prints of films to distributors who exhibited them in the cinema houses. Apart from the consideration received, the assessee collected from the distributors security deposit for the due fulfilment of the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its were simplicitor. The distributors in that case just did not come to collect their security deposits which remained unclaimed for quite sometime. In the instant case, however, the facts are quite different. The security deposits were lying against issue of bottles and shells. The security deposits could be refunded only when the retailers returned the bottles and shells. When for a reasonable period of time, the bottles and shells were not returned, the assessee was within its right to forfeit the excess amount of deposits and that forfeiture has not been challenged by any of the retailers. 29. In the case of Indian Engg. Commercial Corpn. (P.) Ltd. the assessee had received certain deposits from customers to whom the assessee had sold tractors. Such amounts remained unclaimed and were written back by the assessee. On these facts, it was held by the Tribunal that the deposits were not trading receipts and even if they were trading receipts they could not be said to have arisen in the year relevant to assessment year 1980-81. The facts of that case also are distinguishable. In that case, the customers were not to perform any obligation except to come and collect their excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% of the expenses. 34. It was submitted by Shri Ganesan that for assessment year 1981-82, 1/5th of car expenses were disallowed. It was also submitted that manufacturing activity had to be suspended, but some business was still carried on and up to assessment year 1981-82, the assessee had derived licence fee by leasing out the factory premises and plant and machinery which was also its business activity. 35. We find that in the light of facts and circumstances of the case, the disallowance of 1/4th of car expenses, telephone expenses and depreciation on car are eminently justified. The grounds raised by the assessee and the revenue in this regard are, therefore, rejected. 36. The next ground in the assessee's appeal relates to the disallowance of deduction for minimum power charges amounting to Rs. 27,828. The disallowance had been made because no manufacturing activity was done by the assessee in the year under consideration. We, however, find that for assessment year 1981-82, the assessee had got lease income of Rs. 3,00,000 and it was possible that the assessee may give the factory again on lease for which electric connection had to be retained. What the assessee has cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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