1975 (9) TMI 66 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of bottle and crate deposits in taxable turnover.
2. Bona fide nature of the deposit arrangement.
3. Applicability of sales tax on bottle deposits.
4. Treatment of bottle deposits as part of the sale price of liquor.
5. Rate of tax applicable to bottle deposits.

Issue-wise Detailed Analysis:

1. Inclusion of Bottle and Crate Deposits in Taxable Turnover:
The appellant disputed the inclusion of amounts collected as bottle and crate deposits in its turnover for the assessment years 1971-72 and 1972-73. The disputed turnover was Rs. 5,44,084.78 for 1971-72 and Rs. 10,06,823.05 for 1972-73. The appellant argued that these deposits should not be included in the taxable turnover as they were refundable deposits and not part of the sale price.

2. Bona Fide Nature of the Deposit Arrangement:
The appellant, a distributor of liquor for United Breweries Ltd., argued that the bottle deposit system was a long-standing practice due to the acute shortage of empty bottles. The deposits were intended to ensure the return of bottles and crates to the breweries. The appellant maintained that the arrangement was bona fide and that the deposits were refundable upon the return of the bottles. The Tribunal noted that the arrangement had been in place for years and that the deposits were collected and refunded systematically.

3. Applicability of Sales Tax on Bottle Deposits:
The appellant contended that the bottle deposits should not be subject to sales tax as they were not part of the sale price of the liquor. The appellant cited a previous decision of the Tribunal for the assessment year 1958-59, where it was held that bottle deposits could not form part of the turnover as they were returnable to the purchaser. The appellant also referenced the Allahabad High Court's decision in Dyer Meakin Breweries vs. Commissioner of Sales Tax, which supported the view that bottle deposits were not sales and thus not subject to sales tax.

4. Treatment of Bottle Deposits as Part of the Sale Price of Liquor:
The assessing authority and the AAC (Appellate Assistant Commissioner) treated the bottle deposits as part of the sale price of liquor and included them in the taxable turnover. The assessing authority taxed the surplus amount credited in the accounts for the year 1971-72 and the entire deposits collected for 1972-73. The AAC enhanced the assessment for 1971-72 to include the entire deposits and also included deposits against crates. The Tribunal, however, found that the bottle deposits collected by the appellant were bona fide and that the property in the bottles and crates remained with the breweries. The Tribunal concluded that the deposits were not part of the sale price of liquor and should not be included in the taxable turnover.

5. Rate of Tax Applicable to Bottle Deposits:
The appellant argued that even if the bottle deposits were considered as sales, the rate of tax should be at the multi-point rate of 3% and not the rate applicable to the contents of the bottle. The Tribunal found that the deposits collected by the appellant were not sales and thus not subject to sales tax. However, for the period before August 3, 1972, when Ruttanjee and Co. (another supplier) did not charge bottle deposits, the Tribunal treated the amounts collected as part of the sale price of liquor and confirmed the addition to the taxable turnover for that period.

Conclusion:
The Tribunal allowed the appeals in part, providing relief to the appellant for the amounts collected as bottle deposits from United Breweries Ltd. The Tribunal confirmed the inclusion of bottle deposits in the taxable turnover for the period before August 3, 1972, for supplies from Ruttanjee and Co. The appellant was entitled to relief on a turnover of Rs. 4,80,484.78 for 1971-72 and Rs. 8,22,085.65 for 1972-73, along with consequential surcharge and additional tax.