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TMI Blog2005 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act, 1961, by the Tribunal at the instance of the Revenue (Commissioner of Income-tax) in R.A. Nos. 148 to 151/Ind of 1992 arising out of an order dated August 6, 1996, passed by the Income-tax Appellate Tribunal in I.T.A. Nos. 730 and 731/Ind of 1987 and 316/7/Ind of 1988 to answer the following questions of law said to arise out of the appellate order referred supra. "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the claim of retrenchment compensation though there was no retrenchment of workers or closure of business? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the bottles used in liquor business as plant? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the assessee as owner of the bottles used in its business though the ultimate ownership of bottles rest with the Government of M.P.? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating surplus in bottle deposit account as belonging to the customers and is not taxable income of the assessee?" T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C); AIR 1967 SC 1559, this question or we may say a somewhat similar question came to be considered by their Lordships of the Supreme Court. In that case, the question arose consequent upon the transfer of business of the assessee as to whether the assessee could claim the deduction as payment of retrenchment compensation. Their Lordships then in detail examined the scheme of retrenchment compensation in the light of section 25FF of the Industrial Disputes Act and then in the context of the Income-tax Act for allowing as allowable deduction. In para. 7 their Lordships held as: "Para. 7. Liability to pay retrenchment compensation arises under section 25FF when there is a transfer of the ownership or management of an undertaking: it arises on the transfer of the undertaking and not before. Transfer of ownership or management of an undertaking in law operates, except in the conditions set out in the proviso, as retrenchment of the workmen. But until there is a transfer of the undertaking resulting in determination of employment, the workmen do not become entitled to retrenchment compensation. So long as the ownership of the business continues with the employer, the right of the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure must be for the purpose of carrying on the business. Where accounts are maintained on the mercantile system, if liability to make the payment has arisen during the time the business is carried on, it may appropriately be regarded as expenditure. But where the liability is, during the whole of the period that the business is carried on, wholly contingent and does not raise any definite obligation during the time that the business is carried on, it cannot fall within the expression 'expenditure laid out or expended wholly and exclusively for the purpose of the business." And at last their Lordships answered the question against the assessee and held as under (page 651 of [1967] 65 ITR and page 1563 of AIR 1967 SC): "Para. 14. The amount of Rs. 1,41,506 claimed as a permissible allowance by the assessee in its profit and loss account cannot, in our judgment, be regarded as properly admissible either under section 10(1) or section 10(2)(xv) of the Income-tax Act. The answer to the question must, therefore, be in the negative." When we examine the facts of this case in the light of what is quoted 10 supra in paras. 7 and 12, it becomes clear that in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a fact then in terms of section 25FF of the Industrial Disputes Act, a case of payment of retrenchment compensation is made out under the Industrial Disputes Act. Such was neither the case before the Supreme Court nor in the present case. In this view of the matter, the assessee was not entitled to claim the benefit of deduction of Rs. 48,941 under the head "Retrenchment compensation", as a permissible deduction under the Income-tax Act. In view of the aforesaid discussion, we answer question No. 1 in favour of the Commissioner of Income-tax, i.e., the Revenue, and against the assessee. In other words, we answer question No. 1 by saying that the Tribunal was not justified in allowing the claim of retrenchment compensation in favour of the assessee. This takes us to questions Nos. 2 and 3, as in our opinion both these questions are interlinked with each other. For convenience, we reproduce these questions Nos. 2 and 3, infra: "2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the bottles used in liquor business as plant? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in a position to claim ownership for the purpose of claiming depreciation under the Act. Secondly, one need not be an absolute owner of the goods for claiming depreciation under the Act. In view of the aforesaid discussion, we answer questions Nos. 2 and 3 quoted supra against the Commissioner of Income-tax, i.e., the Revenue, and in favour of the assessee. In other words, we answer the aforesaid two questions, i.e., questions Nos. 2 and 3 by holding that the Tribunal was justified in holding that the bottle is a plant and hence entitled the assessee to claim depreciation on the bottles under the Income-tax Act. This takes us to the last question No. 4 which for convenience reads as under: "4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating surplus in bottle deposit account as belonging to the customers and is not taxable income of the assessee?" It is not in dispute that though the assessee used to collect the money from each customer against each bottle sold to him it was in the nature of a deposit with the assessee and on fulfilment of the conditions stipulated in that behalf, the assessee had to refund the money to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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