TaxTMI 
TaxTMI 
2007 (11) TMI 260
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...., which is as under : "Whether the Income-tax Appellate Tribunal is legally correct in holding that the settle (bottles) and crates in the assessee's case do not constitute its stock-in-trade and should be treated as 'plant'?" 4. The first question, which is at the instance of the Revenue is taken up. 5. The facts of the case are. The assessee is a private limited company and filed its return of income for the assessment year 1979-80 showing a net loss of Rs. 5,39,870. The assessment was completed by the Assessing Officer under section 143(3) on a net loss of Rs. 3,15,890 in 1982. 6. The assessee claimed to 100 per cent. depreciation under section 32(1) (ii) on bottles and crates treating these as 'plant' used in the business of manufacture of soft drinks run by the assessee-company. In the assessment proceedings, the claim of the assessee was negatived on the ground that the assessee-company all along in the past had been treating the bottles and crates as stock-in-trade. 7. Subsequently, the assessee went in appeal before the Commissioner of Income-tax (Appeals), Agra, who held that the assessee-appellant was entitled to, 100 per cent. depreciation on crates and bo....
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....ssee and against the Department. 12. On the second question, learned counsel for the assessee has argued at length. 13. The facts with regard to the second question which are being reproduced below for facility of reference are that the assessee-company owns a bottling plant and manufactures soft drinks, viz., "Double Seven", Vidhu, Soda, etc. The products are sold in bottles in the market with trade name. 14. The assessee used to manufacture and sell Coca Cola and Fanta since its inception. The Government of India banned the manufacture and sale of Coca Cola and Fanta in India. The assessee was, therefore, constrained to obtain bottling rights of a new product, viz. "Bibhu" and "Double Seven". The business of the company had to be reorganised and set up to manufacture a new brand of product. In order to popularise the new product, the assessee had to incur expenditure in its territories of U. P., Delhi, etc. There was business competition in the market with the other suppliers, viz, Campa Cola, Thums-up, etc. 15. Learned counsel for the Department has argued that the Assessing Officer disallowed advertisement expenditure to the extent of Rs. 1,13,878 in terms of sub-se....
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....e operation of sub-section (3A) would be available to the assessee in respect of the year referred to above, and two previous years immediately succeeding the said previous year. 10. The primary condition, therefore, that has to be fulfilled by an assessee in order to bring the case within sub-section (3D) is to show that he has set up an industrial working would naturally be for the production of an article. The production of an article is, thus result of the setting up of the industrial undertaking, and unless it can be shown by a person that an industrial undertaking had been set up and that such undertaking has started manufacturing articles within the previous years, the provisions of sub-section (3D) would not apply." 18. Learned counsel for the Revenue has argued that the assessee has not set up any industrial undertaking during the previous year under consideration. The industrial undertaking, namely, the bottling plant was in existence for a considerable period before the beginning of the previous year under consideration. In the said plant, the assessee has started bottling Double Seven during the year under consideration, instead of Coca Cola and Fanta, etc., in th....
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....roduction process. 23. In case these three conditions are fulfilled, the assessee would become entitled to the benefit of section 37(3D) of the Act. However, the stipulation as stated above, does not include the word "new". 24. Learned counsel for the assessee has argued that sub-section (3A) to section 37(3D) is not applicable where an industrial undertaking begins to manufacture in the previous year. He further contends that there is no requirement of the aforestated provision that unit should have been set up in the previous year. The benefit of section 37(3D) is granted not from the time from when an industry was set up but from when it began to manufacture. It applies even if new product is manufactured by existing industrial undertaking. 25. He has further argued that the object of section 37(3D) is to encourage diversification of existing units, so that they could launch new product and benefit of the promotional expenditure is given. However, the benefit of section 37(3D) is not to be granted to new unit and such benefit to new unit is granted under sections 80J and 80HH, whereby the word "new" is specifically used. It is further argued that the benefit is not gran....
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....ce of a part of such expenditure in the computation of taxable profits……..Newly established industrial concerns will also be exempted from this provision for an initial period of three years." 29. He argued that the word "also" signifies that existing set up is already covered and benefit to new set up is in addition to the already existing set 30. To support this argument, learned counsel for the assessee has relied upon the decision rendered in the case of Karnataka Small Scale Industries Development Corporation Ltd. v. CIT [2002] 258 ITR 770; [2003] 7 SCC 224, in which the hon'ble apex court has held that the Budget Speech of the Finance Minister can be relied upon for the purpose of interpretation of section. 31. Learned counsel for the assessee has also placed reliance on a decision of the Andhra Pradesh High Court in the case of CIT v. Hyderabad Bottling Co. P. Ltd. [2000] 243 ITR 476, wherein the Andhra Pradesh High Court came to the conclusion that on similar facts where the assessee was legitimately eligible to invoke the benefit of section 37(3D) in so far as the advertisement as well as promotion expenses on the launch of new product Thums-up was concerned. ....