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TMI Blog2007 (11) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue which is given below: "Whether the Income-tax Appellate Tribunal is legally correct in permitting the assessee to change its method of accounting in respect of bottles and crates and in coming to the conclusion that 'bottles and crates' constitute 'plant' totally disregarding the past practice of the assessee in regard to these items?" 3. The second question is at the instance of the assessee, which is as under : "Whether the Income-tax Appellate Tribunal is legally correct in holding that the settle (bottles) and crates in the assessee's case do not constitute its stock-in-trade and should be treated as 'plant'?" 4. The first question, which is at the instance of the Revenue is taken up. 5. The facts of the case are. The assessee is a private limited company and filed its return of income for the assessment year 1979-80 showing a net loss of Rs. 5,39,870. The assessment was completed by the Assessing Officer under section 143(3) on a net loss of Rs. 3,15,890 in 1982. 6. The assessee claimed to 100 per cent. depreciation under section 32(1) (ii) on bottles and crates treating these as 'plant' used in the business of manufacture of soft drinks run b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on: (1) CIT v. Prem Nath Monga Bottlers P. Ltd. [1997] 226 ITR 864 (Delhi). (2) CIT v. Margadarsi Chit Fund P. Ltd. [1997] 227 ITR 646 (AP). (3) CIT v. Saurashtra Bottling P. Ltd. [1997] 232 ITR 270 (Guj). 11. Respectfully following the decisions of this court given in I. T. R. No. 183 of 1993 ( CIT v. Agra Beverages Corpn. P. Ltd. [2008] 300 ITR 295. We answer the above questions in the affirmative, i.e., in favour of the assessee and against the Department. 12. On the second question, learned counsel for the assessee has argued at length. 13. The facts with regard to the second question which are being reproduced below for facility of reference are that the assessee-company owns a bottling plant and manufactures soft drinks, viz., "Double Seven", Vidhu, Soda, etc. The products are sold in bottles in the market with trade name. 14. The assessee used to manufacture and sell Coca Cola and Fanta since its inception. The Government of India banned the manufacture and sale of Coca Cola and Fanta in India. The assessee was, therefore, constrained to obtain bottling rights of a new product, viz. "Bibhu" and "Double Seven". The business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. From the wording of sub-section (3D) above, it would be clear that in order to bring the case within the exception provided therein, the assessee should be able to show: (i) That he has set up an industrial undertaking for the manufacture or production of any article; and (ii) That such undertaking has begun to manufacture or produce such articles within the previous year. On the above conditions being fulfilled, the exception from the operation of sub-section (3A) would be available to the assessee in respect of the year referred to above, and two previous years immediately succeeding the said previous year. 10. The primary condition, therefore, that has to be fulfilled by an assessee in order to bring the case within sub-section (3D) is to show that he has set up an industrial working would naturally be for the production of an article. The production of an article is, thus result of the setting up of the industrial undertaking, and unless it can be shown by a person that an industrial undertaking had been set up and that such undertaking has started manufacturing articles within the previous years, the provisions of sub-section (3D) would not apply." 18. Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the case, which has been cited above stipulates the words "set up" an industrial undertaking. He argued that this phrase does not contain the word "new". 22. According to learned counsel for the assessee in order to get the benefit of section 37(3D), three conditions are to be fulfilled (i) benefit is granted to an industrial undertaking; (ii) it should be set up (established) by an assessee; (iii) it should involve in manufacturing/production process. 23. In case these three conditions are fulfilled, the assessee would become entitled to the benefit of section 37(3D) of the Act. However, the stipulation as stated above, does not include the word "new". 24. Learned counsel for the assessee has argued that sub-section (3A) to section 37(3D) is not applicable where an industrial undertaking begins to manufacture in the previous year. He further contends that there is no requirement of the aforestated provision that unit should have been set up in the previous year. The benefit of section 37(3D) is granted not from the time from when an industry was set up but from when it began to manufacture. It applies even if new product is manufactured by existing industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te his argument, learned counsel for the assessee has relied on the Budget Speech of the Finance Minister for the Finance Act, 1978, reported in [1978] 7 CTR (SC), page 101 (J.S), para 83, [1978] 111 ITR (St.) 85, 89, Part B) "Extravagant and socially wasteful expenditure is often incurred on advertisement, publicity and sales promotion. In order to put a curb on such expenditure at the cost of the exchequer, I propose to provide for the disallowance of a part of such expenditure in the computation of taxable profits……..Newly established industrial concerns will also be exempted from this provision for an initial period of three years." 29. He argued that the word "also" signifies that existing set up is already covered and benefit to new set up is in addition to the already existing set 30. To support this argument, learned counsel for the assessee has relied upon the decision rendered in the case of Karnataka Small Scale Industries Development Corporation Ltd. v. CIT [2002] 258 ITR 770; [2003] 7 SCC 224, in which the hon'ble apex court has held that the Budget Speech of the Finance Minister can be relied upon for the purpose of interpretation of section. 31. Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce such articles and each of the two previous years immediately succeeding that previous year." 36. From the above, it is apparent that the words used in the statute are "has set up an industrial undertaking". On a plain reading of these words show requirement that an industrial undertaking must be "set up". The words "set up" as defined in various dictionaries means "established and organised". The meaning of the words "set up" as given in Concise Oxford Dictionary is reproduced below "Set up - to organise or start a business; establish in some capacity." 37. In view of the above, the phrase "set up" used in the section does not qualify the words "set up" by adding before it the word "new" and such being the case, the word "new" cannot be read into the expression by the court, as a result of which, the obvious answer to the question raised by the assessee is that the benefit of section 37(3D) would also be available to the assessee, which was an industrial establishment already set up but had launched a new product. The requirement of the section was not that of setting up of a new undertaking but would be satisfied where the industry has undertaken the productio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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