9911796707
TMI Blog1991 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... e hessian into rolls. In the assessment of the assessee for the year under consideration, i.e., 1964-65, the Income-tax Officer, on the basis of the seized correspondence, pertaining to the Bird group of companies, which came to be with him, has come to the conclusion that the following facts emerged therefrom: "(i) The cores were not separately charged for by the mills when the rolls were 'sold' to Becker Gray. Nor did Becker Gray charge W.L.F. separately for the cores. In their declaration before the Customs, Becker Gray clearly stated that the cores were returnable. When W. L. F. sold the rolls to the consumers in U. S. A., they obtained a deposit of $10 to $13 from them for ensuring the return of the cores. If the cores were lost, the deposits were forfeited. The returned cores were shipped back to India and eventually found their way to the respective mills to be reused by them. (ii) The average cost of a new core was about Rs. 100, whereas the cost of shipping back an old core would be about Rs. 20 only. (iii) A core could be used over and over again after minor attention in some cases for straightening bent cores. The assessee's accounting procedure has been to debit as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 taking into account its share in the total exports. " The assessee filed an appeal before the Appellate Assistant Commissioner. The assessee contended that the cost of steel cores amounting to Rs. 3,50,164 as well as the cost of bringing back the used steel cores amounting to Rs. 2,39,545 should be treated as revenue expenditure. The Appellate Assistant Commissioner upheld the addition of Rs. 3,50,164 being the cost of the steel cores subject to the allowance of appropriate depreciation. He, however, agreed with the assessee that the expenditure in bringing back the used cores amounting to Rs. 1,39,545 should be allowed as revenue expenditure. As regards the assessee's share in the amount forfeited, amounting to Rs. 90,000 for non-return of steel cores by customers, the Appellate Assistant Commissioner upheld the Income-tax Officer's action in adding the said sum in the total income of the assessee. The assessee filed a further appeal before the Tribunal. On going through all the relevant facts, the Tribunal found that the position in the present case was similar to the case of Kinnison jute Mills Co. Ltd. decided by the Tribunal, vide its order in I. T. A. No. 628/(Cal) of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was exported to the U. S. A, and Becker Gray and Co. (1930) Ltd. acted as an exporter of this special type of wide hessian cloth. The purchase of new steel cores was accounted for in the consumable stores account and the assessee claimed it to be consumable stores and hence revenue expenditure deductible in computing the total income of the assessee. Wide carpet backing cloth was rolled on steel cores which were sold to Becker Gray and Co. for export and the steel cores were not charged separately to Becker Gray and Co. by the assessee. The exporter, Becker Gray and Co., stated before the Customs Authority that the steel cores were returnable. This declaration by the exporter has nothing to Co with and not given by the assessee but by some other company which is a separate entity (sic). Becker Gray and Co., while exporting carpet backing cloth to White Lamb Finlay, U. S. A., did not charge separately for the cores but W. L. F. kept the deposit for the cores from its customers for ensuring the return of the cores and sometimes the cores were returned to the exporter and the exporter distributed the cores to different mills by charging the shipment and other incidental charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Becker Gray made it clear that the subject-matter of the sales also Included the steel cores, but we regret to state that learned counsel for the assessee was not able to point out the so called documentary or oral evidence in regard to the steel cores or the contracts between the assessee and Becker Gray in that behalf. The fact, as has been brought out in the aforesaid order referred to in the paragraph in the matter of the export of wide hessian to the U.S.A., is that Becker Gray has only acted as an export house and that they were interested in having their profit at 3/4ths percentage. In substance, the transactions were between the assessee mills and the other two mills and the ultimate purchasers through the agency of Becker Gray and White Lamb Finlay and the said three jute mills including the assessee were the real persons interested who were affected by the fluctuation in the prices of the wide hessian exported to America. They were to get the surplus or meet the deficiency, if any, due to the said fluctuation in the prices of the wide hessian. In the absence of the assessee to refer and show to us the so called documentary and oral evidence and/or the contracts between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that, when these cores were received back by the assessee-company, they had been resold by Becker Gray to it. Further, the fact that there was an adjustment between Becker Gray and W. L. F. as brought out in the grounds of appeal for the accounting period relevant to the assessment year 1964-65, does not, in any way, displace the above conclusion. As rightly pointed out by the tax authorities, the steel cores can be taken as analogous to the cylinders used as containers for supply of gas, etc. The cores were certainly not stores which could be considered to be consumable as claimed. As already stated, these cores could be used almost indefinitely unless very badly damaged. We, therefore, on the facts and the circumstances of the case, and the material on record and our above discussion, hold that the tax authorities were justified in treating the assessee mill as the real owner of the cores and the expenditure for purchasing new cores in the years under consideration as capital expenditure. We, therefore, uphold the finding of the tax authorities in this behalf. " It was argued before the Tribunal that, in the case of Kinnison jute Mills Co. Ltd., according to the contracts spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say, in other words, the specimen contracts produced before us do not render any help or assistance to the assessee in the present case as to make it distinguishable from that of the Kinnison jute Mills Co. Ltd. . The position in the present case appears to be similar to that in the case of Kinnison jute Mills Co. Ltd. We have perused our said earlier order in the case of Kinnison jute Mills Co. Ltd. For the reasons stated in the said order, with which we agree, we hold that in the case of the present assessee also the tax authorities were justified in treating the assessee mill as the real owner of the steel cores and the expenditure for purchasing the new steel cores in the year under consideration as capital expenditure." In our opinion, the finding of the Tribunal does not call for interference by this court. The decision of the Tribunal that the assessee-company was the real owner of the steel cores was based on facts and evidence and it cannot be said that the Tribunal committed any error. The finding of the Tribunal to the effect that the expenditure incurred for purchasing steel cores was a capital expenditure, is also justified. Under such circumstances, question No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
