COMMISSIONER OF INCOME-TAX VS MADURAI SOFT DRINKS (P.) LTD
2001 P T D 1734
[241 I T R 2291]
[Madras high Court (India)]
Before R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME‑TAX
Versus
MADURAI SOFT DRINKS (P.) LTD.
Tax Case Petition No.255 of 1998, decided on 20/08/1998.
Income‑tax ‑‑‑
‑‑‑‑Reference‑‑‑Income‑‑‑Assessee, manufacturer of soft drinks, receiving deposits for return of bottles‑‑‑No intention to sell bottles or to buy back bottles with deposits‑‑‑Such deposit did not constitute income of assessee‑‑‑Reference not called for‑‑‑Indian Income Tax Act, 1961, 5.256(2).
The assessee was a manufacturer of soft drinks. The bottles were used by the assessee as containers for the soft drinks sold by it. The assessee received deposits from its customers for the bottles, such deposits being returnable after the bottles were returned. The Revenue sought to treat the deposits received by the assessee as its income for the assessment year 1983‑84. The Tribunal had held that the intention of the assessee in receiving the deposits was not to treat the delivery of the bottle as part of the transaction of sale, and‑the deposit was not intended to be regarded as the proceeds of the sale. The deposit was meant to be a deposit only and not consideration for the sale, and that deposit was one which was required to be returned as and when the bottles were returned. The Tribunal held that such deposit did not constitute income of the assessee. On an application to direct reference:
Held, dismissing the application, that the Tribunal was right in holding that the deposit received from the customers for bottles used as containers of soft drinks did not constitute income of the assessee.
Punjab Distilling Industries Ltd. v. CIT (1959) 35 ITR 519 (SC) ref.
United Breweries Ltd. v. State of A.P. (1997) 3 SCC 530 applied.
C.V. Rajan for the Commissioner.
Nemo for the Assessee.
JUDGMENT
R. JAYASIMHA BABU, J.‑‑‑The assessee is a manufacturer of soft drinks. The bottles are used by the assessee as containers for the soft drinks sold by it. The assessee received deposits from its customers for the bottles. Such deposits being returnable after the bottles were returned. The intention of the assessee was to re‑use the bottles, as that would keep down the cost of the marketing, and by ensuring that the price for the soft drinks is at a reasonable level, the market for the soft drinks could be developed further.
The Revenue sought to treat the deposit received by the assessee as its income for the assessment year 1983‑84. The Tribunal has upheld the plea of the assessee that such deposit did not constitute income of the assessee.
It is the contention of the Revenue that the decision of the Supreme Court in the case of Punjab Distilling Industries Ltd. v. CIT (1959) 35 ITR 519, is applicable to the facts of this case. The facts considered in that case were in the context of the buy‑back scheme, which had been framed by the Government, under which scheme, it was mandatory for the distillers to buy back the bottles in which the intoxicating liquor had been sold. As the very nomenclature indicates the scheme involved an initial sale and subsequent buy‑back.
That decision was explained by the Supreme Court _in the case of United Breweries Ltd. v. State of A.P. (1997) 105 STC 177; (1997) 3 SCC 530. The Court, after referring to the special facts of the case considered in Punjab Distilling Industries Ltd. (1959) 35 ITR 519 (SC), and distinguishing held that the matter is always one of the intention of the parties that if the parties did not intend that the property in the bottles should pass to the buyer of the contents, the fact that the contents were delivered in the bottle would not have the effect of the bottle itself having been the subject-?matter of the sale. The Court pointed out that the object of collecting the deposits was to ensure the return of the bottle and not merely to reserve an" option of buying‑back goods which had already been sold. It was in the interest of the manufacturer to receive back the bottles, as those bottles were capable of being recycled and re‑used, and when so used, it would help the manufacturer to reduce or keep under control his cost of production, and by doing so, develop the market for the product further. The provisions of sections 20 to 23 of the Sale of Goods Act would be applicable only when there was no contrary intention evident in the transaction between the parties.
The Tribunal has held that the intention of the assessee in receiving the deposit was not to treat the delivery of the bottles as part of the transaction of sale, and the deposit was not intended to be regarded as the proceeds of the sale. The deposit was meant to be a deposit only and not consideration for the sale, and that deposit was one which was required to be returned as and when the bottles were returned. It was not the intention of the assessee to use the amount of the deposit to buy back the bottles which had not been sold in the first place.
We do not see any error in the view of the Tribunal. The tax case petition is, therefore, dismissed.
M.B.A./578/F????????????????????????????????????????????????????????????????????????????????????? Petition dismissed.