Bottles used in soft drink business treated as plant, so their value could not be claimed as a business loss

Bottles used for storing and marketing soft drinks were treated as plant, each bottle constituting a separate unit employed in the business. Their true legal character was not changed by the assessee's earlier accounting treatment. As capital assets, the correct tax treatment was depreciation under the Act, not deduction of their value as a business loss. The claimed loss was therefore not allowable as a business loss.

---

---

Issues: Whether the loss claimed on the value of bottles held by the assessee was allowable as a business loss for the assessment year 1978-79, or whether the bottles were plant attracting depreciation under the Income-tax Act, 1961.

Analysis: Bottles used for storing and marketing soft drinks were held to be plant, each bottle constituting a separate unit used in the assessee's business. The assessee's past treatment of the bottles was not conclusive of their true legal character. Since the bottles were capital assets in their true nature, the assessee's remedy lay in claiming depreciation under the relevant provision rather than treating their value as a revenue loss.

Conclusion: The loss was not allowable as a business loss. The reference was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Bottles used as containers in the manufacture and marketing of soft drinks are plant and therefore a capital asset, so their value cannot be claimed as a business loss and depreciation alone is the permissible tax treatment.

---