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TMI Blog2010 (10) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... tors is enjoyed by them only and the quantum of deposit would vary and depends upon the actual business of each of the distributor - But there is no prohibition under the law that an assessee-company cannot give its distribution either to the relatives of the directors or to its retired employees or to its employees - whether there is a deposit of Rs. 90 lakhs under the head "Security deposit" towards bottles and crates is a question of fact and not a question of law - Decided against the revenue - 430 of 2004 - - - Dated:- 6-10-2010 - MANJUNATH K. L., MANOHAR B., JJ. JUDGMENT K. L. Manjunath J.- 1. The Revenue has come up in this appeal challenging the concurrent findings of the order passed by the Commissioner of Income-tax (Appeals), which has been affirmed by the Income-tax Appellate Tribunal, Bangalore, in I. T. A. No. 861/Bang/96 dated February 25, 2004. The dispute is pertaining to the assessment year 1993-94. 2. The facts leading to this case are as hereunder : The assessee is the company registered under the provisions of the Companies Act, 1956. The assessee is engaged in the business of manufacturing of soft beverages. For the assessment year 1993 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial questions of law : "1. Whether the appellate authorities were correct in holding that the finding of the Assessing Officer that a sum of Rs. 90,00,000 cannot be treated as the income of the assessee despite the finding recorded that the distributors were fictitious and the deposits were mere book entries as admitted by Sri S. N. Ladhani the director of the assessee on mere conjectures and surmises and consequently recorded a perverse finding ? 2. Whether the appellate authorities were correct in holding that a sum of Rs. 3,98,012 claimed by the assessee towards 'bottle breakage' on an assumption that the same was an allowable deduction as the bottles usually break while washing, filling, etc., without there being any cogent evidence and consequently, recorded a perverse finding ? 3. Whether the appellate authorities were correct in holding that a sum of Rs. 4,37,571 towards wooden crates repairs is an allowable deduction on the assumption that the crates are manufactured out of jungle wood and cheap wood and therefore require frequent repairs without there being any evidence to support such a claim and consequently recorded a perverse finding ?" 4. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the appeal. 7. Per contra, learned counsel for the respondent Mr. Shankar contends that the Assessing Officer did not record a finding with regard to the eight distributors, who have deposited Rs. 90 lakhs towards security deposit, that they did not have any transaction with the assessee during the relevant assessment year. According to him, they are the major distributors of the assessee and those distributors are assessed to tax and the books of account maintained by the assessee would disclose the total supply of beverages to these eight distributors which also disclose the total turnover made by the assessee from those eight distributors and considering the total turnover from these eight distributors, the amount of Rs. 90 lakhs paid as security deposit could not have been added by the Assessing Officer. He further contends that in respect of explanation called for by the Revenue, the assessee has furnished in detail the nature of transaction between the assessee and those eight distributors and it has also been brought to the notice of the Revenue that all those eight distributors are assessed to tax and that whether the amount of Rs. 90 lakhs paid by those eight d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re incurred everyday and the same cannot be treated as a capital expenditure since as and when the wooden crates are damaged, it requires repairs without which the assessee cannot continue its business. In the circumstances, he requests the court to dismiss the appeal holding the substantial questions of law raised by the Revenue against the appellant. 9. Having heard the learned counsel for the parties and having perused the order passed by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we are of the opinion that the substantial questions of law raised in this appeal are to be answered against the Revenue for the following reasons : 10. So far as substantial question No. 1 is concerned, admittedly, pursuant to an enquiry made by the Revenue, a reply was sent by the assessee on May 24, 1994, wherein it is stated those eight distributors are not the benamis of the assessee and the business of each distributor is an independent entity controlled by its proprietors/partners and the income earned by those distributors are absolutely enjoyed by the respective proprietors/partners. He further states that the quantum of deposit collected from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant and in view of the concurrent findings of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, we have no reason to interfere with the said findings and according to us, the question whether there is a deposit of Rs. 90 lakhs under the head "Security deposit" towards bottles and crates is a question of fact and not a question of law. At this stage, learned counsel appearing for the assessee submits that for the subsequent years, the deposit of those eight distributors has been accepted by the Revenue. Whether it is accepted by the Revenue for the subsequent years is not a criteria for this court to consider the first substantial question of law. If really the Revenue has accepted the security deposit of those eight distributors with the assessee-company, then it would only improve the case of the assessee. 12. So far as the bottle breakage charges are concerned, whenever the bottles are used for the business by the assessee-company, in the usual wear and tear either while transporting or washing or filling, the bottles are bound to break and the bottle breakage charges are treated as allowable deduction for the earlier years and also for the lat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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