TMI Blog2022 (7) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... w taken in the case of Jai Drinks (P) Ltd. [ 1987 (9) TMI 8 - RAJASTHAN HIGH COURT] and Sri Krishna Bottlers Pvt. Ltd. [ 1988 (4) TMI 10 - ANDHRA PRADESH HIGH COURT] construing the provisions of Section 43 (3) of the Act. Supreme Court, in the case of Steel City Beverages Ltd. [ 1998 (11) TMI 125 - SUPREME COURT ] considered the issue of whether the bottles and crates can be construed the definition of Plant and held bottles those could not be considered as stock in trade. However, the issue that arose before the Supreme Court under the Bihar Sales Tax Supplementary (Deferment of Tax) Rules 1990 Tribunal, before following the decision of the Supreme Court in Steel City Beverages Ltd., had not adverted to these observations of the Supreme Court at all and, therefore, clearly erred in applying this decision and not following the decisions of the High Courts of Rajasthan and Andhra Pradesh cited before it, which had construed the same provision which was under consideration. Respondent that bottles and crates could not be included in the definition of the Plant because they have no reference to the categories mentioned therein; therefore, cannot be accepted. As regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle and crate was less than Rs.5000/-. According to the Appellant, the bottles and crates were the tools by which the Appellant carried on its business of manufacturing and sale of soft drinks. Since the cost of each bottle and crate was less than Rs.5000, the Appellant claimed 100% depreciation on the bottles and crates as per the proviso to Section 32(1)(ii) of the Act. 5. The Assessing Officer passed the order on 26 March 1992 under Section 143 (3) of the Act holding that the bottles and crates cannot be construed as Plant as per the definition of Section 43(3) of the Act and they have to be construed as stock-in-trade and accordingly, the depreciation as claimed by the Appellant was not allowed. The Appellant filed an appeal before the Commissioner of Income Tax (Appeals) on 30 April 1992. The Appellant relied upon the decisions of the Rajasthan High Court in the case of Commissioner of Income Tax vs. Jai Drinks (P.) Ltd.(1988) 173 ITR 100 (Raj.) and Andhra Pradesh High Court in the case of Commissioner of Income Tax vs. Sri Krishna Bottlers Pvt. Ltd. (1989) 175 ITR 154 (A.P.) holding that the crates and bottles used for the business of manufacture and sale of soft dri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 21 September 2001. Being aggrieved by the said order, the Appellant filed the present appeal. The appeal is admitted on the question of law as reproduced above. 7. We have heard Mr. Jeet Kamdar, the learned Counsel for the Appellant and Mr. Arvind Pinto, learned Counsel for the Respondent. 8. Section 43(3) of the Act as it stood at the relevant time, i.e., assessment year 1989-90 reads thus: 43(3) plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. 9. Mr.Kamdar, the learned Counsel for the Appellant submitted that the Tribunal had not followed the decisions of the Andhra Pradesh High Court and Rajasthan High Court, which are directly on the point as to the definition of Plant in Section 43(3) of the Act and has erroneously relied on the decision of Supreme Court in the case of Steel City Beverages Ltd., which is on the bare perusal of the same, is distinguishable and is rendered in the context of different enactment having different ambit. Mr Kamdar submitted that for the assessment years 1985-86, 1986-87 and 1988-89, the Tribunal has held in favour of the Appellant/A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, observed that the same has to be construed in a wide manner. In Taj Mahal Hotel, the Supreme Court construed the definition of Plant as occurring in Section 10(5) of the Indian Income-tax Act, 1922 ( the 1922 Act ), which corresponded to Section 43(3) of the 1961 Act. It was held that had the definition of Plant was an inclusive definition, and the intention of the Legislature was to give it a wide meaning which is evident from the fact that articles like books and surgical instruments were expressly included in the definition of Plant . The Rajasthan High Court also followed the decision of the Supreme Court in Scientific Engineering House (P.) Ltd., wherein while construing the definition of Plant in Section 43(3), the question of whether drawings, designs, charts, plans, etc., were within the definition of Plant where the assessee's business was to manufacture scientific instruments was answered in favour of the assessee. The tests to be applied was also laid down by the Supreme Court in this decision. The Rajasthan High Court in Jai Drinks (P.) Ltd. held that applying the above test indicated by the Supreme Court, there is no escape from the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single unit unless, of course, the component parts can be treated as separate units having different purposes. (8) The functional test is a decisive test. Bearing these principles in mind, we shall approach the facts of the present case. The bottles containing the soft drink cannot be stock-in-trade inasmuch as the bottle by itself is not the subject of sale. The customer or the retailer returns back the bottle to the assessee after the soft drink is consumed. Likewise, the shells which are sent to the customer or dealer also come back with the empty bottles, and they cannot also be stock-in-trade. What is the function these bottles and shells perform in the assessee's trade ? Are they essentially tools in the assessee's business? In our opinion, yes. The bottles are essential tools of the trade for it is through them that the soft drink is passed on from the assessee to the customer. Without these bottles, the soft drink cannot be effectively transported, like the silos in Schofield v. R. and H. Hall Ltd. [1974] 49 TC 538 (CA), which are used to store grain and to empty the same, performing a trade function. As pointed out in Dixon v. Fitch's Garage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, fixtures, machinery, implements and tools, and apparatus used in carrying on a mechanical operation or an industrial process. This Court in C.I.T. v. Taj Mahal Hotel [1971] 82 ITR 44 and Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86 referred to with approval the observations of Lindley LJ In Yarmouth v. France [1887] 19 QBD 647 that in its ordinary sense plant includes whatever apparatus is used by a businessman for carrying on his business - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business. In that case, this Court further held that the test to decide whether a particular thing is plant would be : Does the article fulfil the function of a plant in the assessee's trading activity? Is it a tool of his trade with which he carries on his business? If the answer is in the affirmative, it will be a plant . Learned counsel for the respondents, heavily relying upon this decision, submitted that the High Court was right in interpreting the word plant in the Deferment Rules as including bottles and crates also as they are used by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anatronics General Co. (P.) Ltd. (2001) 113 Taxman 511. The argument of the learned Counsel for the Respondent that bottles and crates could not be included in the definition of the Plant because they have no reference to the categories mentioned therein; therefore, cannot be accepted. 17. As regards the contention of the learned Counsel for the Respondent based on the Income Tax Rules and Depreciation Table is concerned, the Table is only states that certain categories, which are Machinery and Plants, will have particular rate and rest which fall under the Machinery and Plant will have different rate. Therefore, merely because the bottles and crates do not fall under the categories listed in Item 2 of the Schedule, it cannot be said that they need to be excluded from the definition of Plant , if they, otherwise fall within the definition of Plant . It has to be noted that, however, this question had arisen for the assessment year 1989-90 based on the situation therein, and therefore, the question is whether the Tribunal was right in holding against the Appellant for that particular assessment year. As noted in the decision of Sri Krishna Bottlers Pvt. Ltd., as to what wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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