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DCIT, Circle 16 (1) , New Delhi and ITO, Ward 16 (4) , New Delhi Versus M/s. Tropicana Beverages Co.

2010 (2) TMI 1233 - ITAT DELHI

ITA No.482 /Del/2009, I.T.A. No. 810/Del/2009 - Dated:- 18-2-2010 - SHRI K. G. BANSAL, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER Appellant by: Shri N K Chand, Sr. DR Respondent by: Shri C S Aggarwal, Sr. Adv., Shri Vishal Kalra & Sh. R P Mall, Adv. ORDER PER GEORGE MATHAN, JM: 1. I.T.A. No. 810/Del/2009 is an appeal filed by the revenue against the order of Ld. CIT(A) XIX, New Delhi in appeal No.417/2007-08 dated 17.12.2008 for the Assessment Year 2005-06 and I.T.A. No. 482/De .....

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hases the packed food juices from M/s. Dynamix Dairy Industries Ltd. Pune (hereinafter referred to as Dynamix ). It was the submission that in the course of assessment, it was noticed that the assessee had claimed depreciation on imported machinery which had WDV as on 01.04.2003 at ₹ 1,41,71,165/- and which was installed at the manufacturing premises of Dynamix. It was also noticed that the assessee had claimed depreciation on Visi Refrigerators which were shown at WDV as on 01.04.2003 at .....

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ss of the assessee, the A.O. had disallowed the depreciation. It was the submission that the Ld. CIT(A) had deleted the disallowance by following the decision of Hon'ble High Court of Bombay in the case of Associated Cement Co. Ltd. reported in 68 ITSR 478 and the decision of Hon'ble High Court of Andhra Pradesh in the case of A P Paper Mills reported in 225 ITR 262. It was the submission that the decision of Hon'ble High Court of Bombay was distinguishable in so far as in that case, .....

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of the Hon'ble High Court of Delhi in the case of Punjab National Bank Ltd. reported in 141 ITR 886 wherein it has been held that only portion used for the business was entitled to depreciation. It was the further submission that the decision of the Hon'ble Supreme Court in the case of Liquidators of Pursa Ltd. reported in 25 ITR 265 would also apply wherein it was held that the machinery & plant must be used for the purpose of the business which is actually carried on and the profit .....

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s in that case, the machinery had not been used during the year and the intention of the company was to discontinue its business and the sales of machinery and plant was a step in the process of winding up of its business. It was the further submission that in the said decision, the Hon'ble Supreme Court has categorically held that the words used for the purpose of business means for the purpose of business of the owner to carry on the business and earn profits in the business. It was furthe .....

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essee had also supplied the know how for the manufacture of the fruit juices as the assessee was originally in the business of manufacture of fruit juices and in 1999 for the firsts time the assessee had for commercial expediency entered into the agreement with M/s. Dynamix for the manufacture of fruit juices. It was also the submission that for the purpose of manufacturing the fruit juices and packing the same as per the requirement of the assessee, certain machinery were required which was not .....

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eement or on the expiry of the agreement period, the machinery were to be returned to the assessee. It was further submitted that as per the agreement, if Dynamix uses the machinery provided by the assessee for the manufacture of any other product or produce or for any other person, the agreement stood cancelled and the machinery were liable to be returned to the assessee. It was the further submission that as per clause 7.2 of the agreement, any damage caused to the building or structure on acc .....

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ices only for the assessee and for nobody else nor was the produce sold by Dynamix to a third party. The assessee was holding the complete production of Dynamix captive for its own consumption. It was thus the submission that the machinery were used for the business purpose of the assessee. It was the submission that if the machinery were not provided by the assessee, Dynamix would not be able to manufacture the products as per the agreement with the assessee and the assessee would not be able t .....

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sion of Hon'ble High Court of Bombay in the case of Associated Cement was directly applicable in so far as it had been held that it was the owner of the property who is entitled to depreciation. It was the further submission that the assessee owns the asset being the plant & machinery and the same was used in the manufacturing of the fruit juices which were sold by the assessee though manufactured by Dynamix for and on behalf of the assessee on the basis of know how and methodology and u .....

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rators have to be provided to the dealers who were dealing in the products of the assessee. It was thus submitted that the refrigerators were also used for the purpose of the business of the assessee and was consequently entitled for depreciation. It was the submission that the order of Ld. CIT(A) was liable to be upheld. 4. It was agreed by both the sides that the issues were identical for the Assessment Year 2005-06 and the same submissions applied to the appeal also being I.T.A. No. 810/Del/2 .....

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purpose of enabling the owner to carry on the business and earn profit in the business. With this meaning in mind if the facts in the present case are seen, it is noticed that the assessee is in the business of trading in packed fruit juices. As per the assessee s product supply agreement entered into by the assessee with Dynamix right from 18th Feb 1999, it is noticed that Dynamix is to manufacture fruit juices as per the requirement of the assessee and it is to be packed in accordance with the .....

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ynamix is manufacturing the fruit juices for and on behalf of the assessee. Dynamix has no say in the method of manufacture, product mix, sourcing of raw material quality of raw material, method of packing, design of packing etc. It is not a case where Dynamix manufacture fruit juices and the assessee is a dealer for the fruit juice manufactured by Dynamix. A perusal of the equipment Supply Agreement between the assessee and the Dynamix clearly shows that it manufactures the fruit juices as per .....

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uest of Dynamix has provided the machinery for the purpose of manufacturing the products under the Product Supply Agreement. A perusal of the agreement also shows that it is clearly understood that the machinery would belong to the assessee and not the Dynamix and Dynamix had no charge or claim over the machinery. Even the servicing, maintenance and spare parts of the machinery was to be in done in the presence of the representative of the assessee even though the cost for the same was to be bor .....

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