Law:

Section:

I. Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment year 1993-94 - Security deposit received by assessee, soft drinks manufacturer, from distributors towards wooden crates and bottles could not be treated as assessee's income merely because depositors were related to assessee or they were employees of assessee [In favour of assessee] The Assessing Officer noticed that the books of account of the assessee-company disclosed that it had received an approximate amount of Rs. 90 lakhs as 'security deposit' from some of the distributors towards wooden crates and bottles. Though there were several distributors to the assessee-company, the revenue had entertained a doubt in regard to eight distributors on the ground that they were all fictitious persons and also on the ground that some of them were relatives of the directors of the assessee-company and some of them were retired employees of the assessee-company and some of them were employees. Based on the same, the amount of Rs. 90 lakhs received under the head 'Security deposit' was treated as income of the assessee. Held that the assessee had made a categorical statement that the income earned by those eight distributors was enjoyed by them only and the quantum of deposit would vary and depend upon the actual business of each of the distributors. The assessee had also furnished the details of income-tax returns filed by those eight distributors. There was no prohibition under the law that an assessee-company cannot give its distribution either to the relatives of the directors or to its retired employees or to its employees. Hence, the security deposit could not be treated as the assessee's income. II. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1993-94 - In case of soft drinks manufacturer bottle breakage expenses are allowable; further, cost of repairs to wooden crates is also allowable as a revenue expenditure [In favour of assessee] The assessee was a soft-drinks manufacturer. Bottles were used for the business by the assessee-company and by the usual wear and tear while transporting or washing or filling, the…

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