LexBURMAH SHELL OIL STORAGE AND DISTRIBUTING COMPANY OF INDIA LTD. (NOW KNOWN AS BHARAT PETROLEUM CORPORATION LTD.) versus THE COMMISSIONER OF INCOME TAX (CENTRAL), CALCUTTA
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A B BURMAH SHELL OIL STORAGE AND DISTRIBUTING COMPANY OF INDIA LTD. (NOW KNOWN AS BHARAT PETROLEUM CORPORATION LTD.) v. THE COMMISSIONER OF INCOME TAX (CENTRAL), CALCUTTA APRIL 6, 1994 (M.N. VENKATACHALIAH, CJ. AND G.N. RAY, JJ.] C Income Tax Act, 1961/Income Tax Rules, 1962. Sections 32(1)(iii), 33, 34(3)(a)/R.5, Appendix I, Item M(2)(2)(d)(i)- Depreciation-Development rebat..-Liquid petroleum gas cylinder,-Sale of by Distributor to Refinery-Shortfall in sale-Distributor company claiming deduction of t11e amount-Held, assessee was not entitled to claim deduction D u/s. 32 (l)(iii) as it had not written off the amount in its books of account- Nor was assessee entitled to development rebate as it did not transfer excess amounts of earlier years in the accounting year for purposes of making up corresponding reserve and did not comply with provisions of section 34(3) (a}-Claim for deduction as revenue expenditure was also inadmissibl,,_ E After sale of cylinders by assessee to refinery, cylinders can not be said to be "actually used up" as the same were put to use by both the assessee and the refinery. Words and phrases : F Phrase "actually used up'' occuning in Rule 5 of Income Tax Rules 1962--lnterpretation of The appellant-Company (assessee) was a distributor of liquid petroleum gas manufactured by Burmah Shell Refineries (the Refinery). It had, from 1955 to 1961, acquired Iron Cylinders at a total cost of G Rs.1,0963,754. The Cylinders were used by the assessee as returnable packages, accounted as capital assets but no allowance for depreciation thereon was claimed. The assessee sold the Cylinders to the Refinery in 1961 for Rs. 82,19,947. there was a shortfall of Rs.27,43,807 which the assessee claimed as deduction in the assessment year 1962-63. The claim H of the assessee that the loss on sale of cylinders should be allowed as loss 374 l - ... l l > .. J BURMAH SHELL OIL STORAGE CO. v. COMMR. OF I. TAX 375 on returnable packages was rejected by the Income-Tax Officer. The A assessee's appeal was dismissed by the Appellate Assistant Commissioner. On further appeal, the Income Tax A!Jpellate Tribunal held the cylinders as 'returnable packages' and the loss allowable as revenue expenditure within the meaning of Rule 5 of the Income Tax Rules, 1962. At the instance of the Revenue, the Tribunal made a reference to the High Court, which answered the reference against the assessee bnt granted the cei1ilicate of appeal. The assessee filed the appeal u/s. 261 of the Act. B The assessee contended that in view of the provisions of Section 32(1)(iii) of the Act which apply to machinery and plant listed in Part I of C Appendix to the Rules, the cost of cylinders being Rs. 1,09,63,754 and no depreciation being allowable on those returnable packages, the written down value of Cylinders most be held to be Rs. 1,09,63,754 and since the cylinders were sold at a loss of Rs. 27,43,809 the same was allowable u/s. 32(1)(iii); that the assessee was entitled to development rebate of Rs. 24,15,622 as there was a shortfall in the development rebate reserve D account created by the assessee in the accounting year; that the cylinders having been sold by the assessee, lost their usefulness to the assessee, and must be treated to be actually 'used up' since the expression actually 'used up' in Item M(2)(2)(a)(l) of Part I of the Depreciation Schedule Appendix I of Rule 5 of the Rules, includes both total as well as partial 'use up' E Dismissing the appeal, this Court HELD : 1. The assessee could not claim any deduction u/s.32(1)(iii) of the Income Tax Act, 1961. The High Court was right in holding that quantum of written down value being a pure question of fact must be F founded on consideration of relevant materials, the Tribunal has not dealt with the issue and in the absence of any finding of the Tribunal as to the written down value of the cylinders, such claim could not be considered within the scope and ambit of the reference. Assuming that section 32(1)(iii) applied and the written down value of the cylinders was Rs. G 1,09,63,754, the claim could not be allowed because the assessee had not written off Rs. 27,43,807 in its books of account. [pp. 381-B-D; 384-A] S. Rajagopala Vandaayar v. Commissioner of Income Tax, (1990) 184 I.T.R. 450 and Commissioner of Income Tax v. National Syndicate, (1961) 41 I.T.R. 225, referred to. H 376 SUPREME COURT REPORTS [
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