Law: Income Tax Act, 1961

Section: 256,256(2)

Income-tax ----Reference---Income---Assessee, manufacturer of soft drinks, receiving deposits for return of bottles---No intention to sell bottles or to buy back bottles with deposits---Such deposit did not constitute income of assessee---Reference not called for---Indian Income Tax Act, 1961, 5.256(2). The assessee was a manufacturer of soft drinks. The bottles were used by the assessee as containers for the soft drinks sold by it. The assessee received deposits from its customers for the bottles, such deposits being returnable after the bottles were returned. The Revenue sought to treat the deposits received by the assessee as its income for the assessment year 1983-84. The Tribunal had held that the intention of the assessee in receiving the deposits was not to treat the delivery of the bottle as part of the transaction of sale, and-the deposit was not intended to be regarded as the proceeds of the sale. The deposit was meant to be a deposit only and not consideration for the sale, and that deposit was one which was required to be returned as and when the bottles were returned. The Tribunal held that such deposit did not constitute income of the assessee. On an application to direct reference: Held, dismissing the application, that the Tribunal was right in holding that the deposit received from the customers for bottles used as containers of soft drinks did not constitute income of the assessee. Punjab Distilling Industries Ltd. v. CIT (1959) 35 ITR 519 (SC) ref. United Breweries Ltd. v. State of A.P. (1997) 3 SCC 530 applied. THIS JUDGMENT DELIVERED BY R. JAYASIMHA BABU, J.---The assessee is a manufacturer of soft drinks. The bottles are used by the assessee as containers for the soft drinks sold by it. The assessee received deposits from its customers for the bottles. Such deposits being returnable after the bottles were returned. The intention of the assessee was to re-use the bottles, as that would keep down the cost of the marketing, and by ensuring that the price for the soft drinks is at a reasonable level, the market for the soft drinks could be developed further. The Revenue sought to treat the deposit received by the assessee as its income for the…

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