TMI Blog1998 (2) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... s and wooden shells (crates) for bottling and distribution of its products. According to the assessee, these bottles and crates were "plant" within the meaning of section 43(3) of the said Act and since the cost of each individual item was below Rs. 750 depreciation at 100 per cent. should be allowed to the assessee-company. The amount of Rs. 3,85,092 was claimed as depreciation on these bottles and shells. The Income-tax Officer held that depreciation at 100 per cent. was allowable on the bottles purchased during the previous year relevant to the assessment year. The Commissioner of Income-tax in exercise of powers conferred under section 263 of the Act examined the matter and by his order dated August 26, 1993, set aside the assessment order with a direction to reframe the assessment in which bottles and crates were not to be considered as plant. The Tribunal, on appeal by the assessee, held that the bottles and crates constituted plant and, therefore, were entitled to 100 per cent. depreciation because the cost of each bottle and crate was less than Rs. 750. Learned counsel appearing for the Revenue argued that the bottles and crates were not covered in the inclusive definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 226 ITR 864 had followed the decision of the Andhra Pradesh High Court in Sri Krishna Bottlers Pvt. Ltd. [1989] 175 ITR 154 and taken a similar view. Reliance was also placed on the subsequent decision of the Andhra Pradesh High Court in CIT v. Margadarsi Chit Fund (P.) Ltd. [1997] 227 ITR 646 following the ratio of Sri Krishna Bottlers (P.) Ltd. [1989] 175 ITR 154 (AP). It was also pointed out that in CIT v. Sri Krishna Bottlers (P.) Ltd. [1989] 175 ITR 154 (AP), the SLP filed by the Department against the orders of the Andhra Pradesh High Court rejecting the reference application on the question whether depreciation was allowable on bottles and wooden crates used by the assessee in its soft drinks business, was dismissed. A similar order dismissed a special leave petition rejecting the reference application following the Andhra Pradesh decision in CIT v. Sri Krishna Bottlers (P.) Ltd. [1989] 175 ITR 154 was pointed out from [1994] 209 ITR (St.) 85. Another similar order dismissing the special leave petition was shown from [1995] 211 ITR (St.) 6. The question whether bottles and shells (crates) are plant or not, arises in the context of the provisions of section 32 of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are added to that meaning so that no doubt may arise in that regard and the relevant statutory provisions can be invoked even in respect of such specified types of equipment and articles by treating them as plant when used for the purpose of business of the assessee. In the present case, admittedly, the assessee carries on the business of manufacturing soft drinks and in that process, the bottling is required to be done. The bottles are containers usually of glass or plastic for storing liquid. They are articles necessary for the purpose of being used as containers for liquids and therefore would be a "plant" even in the ordinary sense of the word "plant". The plant which is of the ownership of the assessee and used in his business, would be eligible for depreciation allowance. The nature of the business of the assessee of manufacturing soft drinks requires beverages to be bottled so that they can be supplied to the purchaser. If bottles and shells (crates) are to cease to be of the ownership of the assessee, when goods are so supplied, obviously they would not remain the plant of the ownership of the assessee for use in his business. However, if ownership over bottles and crates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f time, depending upon various factors, including the nature of the use to which it is put, frequency of such use, the manner in which it is handled and other factors which may be relevant to the purpose for which the plant is used. Thus, the durability of a plant will vary having regard to the purpose for which it is used and the manner in which it is used. Therefore, no hard and fast rule can be laid down of a durability test in the context of a period of time. Even a fragile thing if properly handled and intended to be used as a tool or equipment for the purpose of business by the assessee would be a plant, notwithstanding that it could be shattered into pieces by simply throwing it down or by putting it under undue stress. Therefore, the fact that the equipment or article in the nature of glass bottles were used cannot lead to a conclusion that the durability test laid down by the courts is not satisfied. Unless mishandled and broken, these bottles and shells (crates) can continue to be used repeatedly by their owner for his business of soft drinks. We are, therefore, unable to accept the argument that bottles and shells (crates) should be treated as non-durable items and canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taj Mahal Hotel [1971] 82 ITR 44 and Scientific Engineering House Pvt. Ltd. v. CIT [1986] 157 ITR 86 (SC) in which the decision of this court in the case of CIT v. Elecon Engineering Co. Ltd. [1974] 96 ITR 672 was approved and also the decision of the Andhra Pradesh High Court in CIT v. Sri Krishna Bottlers Pvt. Ltd. [1989] 175 ITR 154. In the last mentioned case, the question involved was identical. The assessee-company which manufactured and sold soft drinks claimed depreciation in respect of bottles and shells used by it in the business, for the assessment year 1976-77 and the High Court held that bottles were essential tools of the trade for it was through them that soft drink was passed on from the assessee to the customers. Without bottles and shells, the soft drink could not be effectively transported. The bottles and their contents were totally inter-dependent and so were the shells. The bottles and shells also satisfied the durability test. It was, therefore, held that bottles and shells were plant and the assessee was entitled to depreciation in respect of them under section 32(1)(ii) of the Act. We are in respectful agreement with the ratio of this decision. As laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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