2005 (2) TMI 62

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....quor business as plant? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the assessee as owner of the bottles used in its business though the ultimate ownership of bottles rest with the Government of M.P.? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating surplus in bottle deposit account as belonging to the customers and is not taxable income of the assessee?" The assessee (respondent herein) is a liquor contractor. They are a registered partnership firm engaged in the business of manufacture and sale of liquor. The assessee was granted licence for sale of country liquor under the provisions of the M.P. Excise Act for the period April 1, 1975, to March 31, 1978. This licence though claimed to have come to an end on March 31, 1978, the same was renewed for a further period up to March 31, 1981, from March 31, 1978, by the State in favour of the assessee. For the assessment years in question, i.e., 1978-79 to 1981-82, the assessee claimed a deduction of Rs. 48,941 on the ground that the sum Rs. 48,941 represents retrenchment compensation payable to the workers working....

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....ment of an undertaking: it arises on the transfer of the undertaking and not before. Transfer of ownership or management of an undertaking in law operates, except in the conditions set out in the proviso, as retrenchment of the workmen. But until there is a transfer of the undertaking resulting in determination of employment, the workmen do not become entitled to retrenchment compensation. So long as the ownership of the business continues with the employer, the right of the workmen to claim compensation remains contingent. A workman may, before the transfer of ownership of the business, himself terminate the employment : he may die or he may become superannuated : in none of these cases the owner of the business is under any obligation to pay retrenchment compensation to the workman. The obligation to pay compensation becomes definite only when there is retrenchment by the employer, or when the ownership or management of the undertaking is, except in the cases contemplated by the proviso, transferred to a new employer, and not till then. The right therefore arises from determination of employment, or from transfer of the undertaking : it has no existence before these events take p....

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....and page 1563 of AIR 1967 SC): "Para. 14. The amount of Rs. 1,41,506 claimed as a permissible allowance by the assessee in its profit and loss account cannot, in our judgment, be regarded as properly admissible either under section 10(1) or section 10(2)(xv) of the Income-tax Act. The answer to the question must, therefore, be in the negative." When we examine the facts of this case in the light of what is quoted 10 supra in paras. 7 and 12, it becomes clear that in the present case neither was it a case of determination of employment nor was it a case of transfer of the undertaking. In other words, mere serving of the notice as contemplated under section 25F of the Act was not sufficient. What was necessary in the facts of this case was determination of employment as a fact of the employees and actual payment to each of the workers under the head retrenchment compensation. No such factual finding was recorded on these issues and the discussion centred around to only issuance of so-called notice. It is not in dispute that the licence though expired on paper on March 31, 1978, but again it was continued to operate and enjoyed by the assessee up to March 31,1981, uninterruptedl....

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....m of retrenchment compensation in favour of the assessee. This takes us to questions Nos. 2 and 3, as in our opinion both these questions are interlinked with each other. For convenience, we reproduce these questions Nos. 2 and 3, infra: "2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the bottles used in liquor business as plant? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in treating the assessee as owner of the bottles used in its business though the ultimate ownership of bottles rests with the Government of M.P.?" In our opinion, so far as question No. 2 is concerned, it remains no longer res integra and stands answered by several decisions. In substance, the question that falls for consideration is, whether bottles are a plant for the purpose of claiming depreciation under the Act? This question was examined by the Delhi High Court in the case of Joint CIT v. Anatronics General Co. (P.) Ltd. [2001] 247 ITR 25, the Rajasthan High Court in the case of CIT v. Jai Drinks (P.) Ltd. [1988] 173 ITR 100, the Andhra Pradesh High Court in the case of CIT v. Sri Krishna Bott....