Commissioner of Income Tax vs Prem Nath Monga Bottlers (P.) Ltd.

At the instance of the Revenue, for the assessment years 1970-71, 1971-72 and 1972-73, the following common question has been referred for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that ''bottles'' used by the assessed were ''plant'' and hence entitled to depreciation at 100 per cent. in terms of the proviso to section 32(1)(ii) of the Income Tax Act ?"

In respect of the assessment year 1973-74, the questions referred for the opinion of this court at the instance of the Revenue are :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that ''bottles'' and ''crates'' used by the assessed were ''plant'' and hence entitled to depreciation at 100 per cent. in terms of the proviso to section 32(1)(ii) of the Income Tax Act ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessed was entitled to development rebate on bottles and crates used by the assessed ?

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessed was entitled to the relief u/s 801 of the Income Tax Act in view of the legal position as per the judgments of the Calcutta and Madras High Courts in Century Enka Ltd. Vs. Income Tax Officer, "D" Ward and Others, and Madras Industrial Linings Ltd. Vs. Income Tax Officer and Others, ?"

The question whether bottles and shells used by the assessed constitute "plant" for the purposes of section 32(1)(ii) of the Income Tax Act, 1961, came up for consideration before the Andhra Pradesh High Court in Commissioner of Income Tax Vs. Sri Krishna Bottlers Pvt. Ltd., . A Division Bench of the said court, after considering in detail the case law on the subject, came to the conclusion that the bottles were essential tools of the trade for it was through them that the soft drink was passed on from the assessed to the customers. Without the bottles and shells, the soft drink could not be effectively transported. The bottles and their contents were totally interdependent. So were the shells. The bottles and shells also satisfied the durability test because it was nobody''s case that their life was so transitory or negligible as to warrant an inference that they had no function to play in the assessor�s trade. The bottles and shells, it was held, were, Therefore, "plant" for purposes of the Income Tax Act and the assessed was entitled to depreciation in respect of them u/s 32(1)(ii) of the Act. For reaching the aforesaid conclusion, reliance was also placed by the Andhra Pradesh High Court on a decision of this court in the case of gas cylinders in Commissioner of Income Tax Vs. National Air Products Limited, as also to the decision of the Rajasthan High Court in Commissioner of Income Tax Vs. Jai Drinks (P.) Ltd., . The Rajasthan High Court had also relied upon the decision of this court in Commissioner of Income Tax Vs. National Air Products Limited, , for its conclusion that bottles and shells constituted "plant" within the meaning of the aforesaid provision. The SLP filed against the decision of the Andhra Pradesh High Court has since been dismissed by the Supreme Court (see Standard Mills Co. Ltd. Vs. Commissioner of Income Tax, ).

Agreeing with the view expressed in the aforesaid decisions, we are also of the view that bottles and crates constitute "plant" within the meaning of section 32(1)(ii) of the Act and the assessed is entitled to depreciation. On similar analogy, the assessed would be entitled to development rebate on bottles and crates. In this respect reference may also be made to the decision of the Allahabad High Court in Commissioner of Income Tax Vs. Swadeshi Cotton Mills Co. Ltd., .

In so far as question No. 3 (pertaining to the assessment year 1973-74) is concerned, the same stands concluded against the assessed in view of the decision of the Supreme Court in Lohia Machines Ltd. and Another Vs. Union of India (UOI) and Others, .

For the aforesaid reasons, the question in respect of the assessment years 1970-71 to 1972-73 and questions Nos. 1 and 2 in respect of the assessment year 1973-74 are answered in the affirmative, in favor of the assessed and against the Revenue. Question No. 3 in respect of the assessment year 1973-74 is answered in the negative, in favor of the Revenue and against the assessee. No costs.