PUNJAB DISTILLING INDUSTRIES LTD. versus THE COMMISSIONER OF INCOME-TAX, SIMLA

Citation: [1959] SUPP. 1 S.C.R. 683 · Decided: 24-11-1958 · Supreme Court of India · Bench: T.L. VENKATARAMA AIYYAR, P.B. GAJENDRAGADKAR, A.K. SARKAR · Disposal: Dismissed

Judgment (excerpt)

(1) S.C.R. SUPREME COURT REPORTS 
683 
the said presumption. 
We must, therefore, hold 'that 
the High Court was right in ta.king the view that, on 
the facts and circumstances proved in t.his ca:::e, the 
transaction in question is an adventure in the nature 
of trade. 
The result is the appeal fails and must be dismissed 
with costs. 
' 
Appeal dismissed. 
PUNJAB DISTILLING INDUS'fRIES LTD. 
v. 
THE COMMISSIONER 0]' INCOME-TAX, SIMLA 
(VENKATARAMA AIYAR, GAJENDRAGADKAR and 
A. K. SARKAR, JJ.) 
Income-tax-Distiller tahing deposit refundable on return of 
bottles-Balance of deposits after refund, if trading receipt--Indian 
Income-tax Act (XI of z922), s. IO. 
The appellant, a distiller of country liquor, carried on the 
business of selling liquor to licensed wholesalers. Due to 
shortage of bottles during the war a scheme was evolved, where-
under the distiller could charge a wholesaler a price for the 
bottles in which liquor was supplied at rates fixed by the 
Government, which he was bound to repay to the wholesaler on 
his returning the bottles. In addition to this the appellant took 
a further sum from the wholesalers described as 'security deposit' 
for the return of the bottles. Like the price of the bottles these 
moneys were also repaid as and when the bottles were returned 
with this difference that the entire sum was refunded only when 
90% of the bottles covered by it had been returned. The appel-
lant was assessed to income-tax on the balance of the amounts 
of these additional sums left after the refunds made thereout. 
Held, that the amounts paid to the appellant and described 
as 'security deposit' were trading receipts and therefore income 
of the appellant assessable to tax. These amounts were paid as 
an integral part of the commercial transaction of the sale of 
liquor in bottles and represented an extra price charged for the 
bottles. They were not security deposits as there was nothing 
to secure, there being no right to the return of the bottles. 
G. Ven/1alaswami 
Naidu & Co. 
v. 
The Commissioner 
of Income-ta:. 
Gajendragadka' ]. 
684 
SUl'REME COURT REPORTS [1959] Supp. 
1958 
l(. M. S. Lakshmanicr & Sons v. Commissioner of Income-tax 
and Excess Profits Tax, M_adras, [1953] S.C.R. ro57, followed. 
Punjab Disliliing 
. 
. 
1 d 1 . 
Ltd 
Davies v. The Shell Company of China Ltd., (1951) Tax Cas. 
• "' "" 
· 133; and Morley v. Tattersall, (1938) 22 Tax Cas. 5r, distingui-
Th C v.. . 
shed. 
e 
ommissionef' 
of Income-lax, 
Imperial Tobacco Co. v. Kelly, (1943) 25 Tax Cas. 292, refcrr-
S·imla 
cd to. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 
119 of 1955. 
Appeal from the judgment and order dated June 16, 
1953, of the Punjab High Court in Civil Reference 
No. l of 1953. 
A. V. Viswanatha Sastri and Naunit Lal, for the 
appellant. 
H. N. Sanyal, Additional Solicitor-General of India, 
R. Gopalakrishnan, R. H. Dhebar and D. Gupta, for the 
·respondent. 
1958. November 24. The Judgment of the Court 
was delivered by 
Sarkar]. 
SARKAR, J.-The appellant is a company carrying 
on business as a distiller of country liquor. It was in-
corporated in May 1945 and was in fact a previously 
existing company called the Amritsar Distillery Co. 
Ltd. reconstructed under the provisions of the Com-
pany's Act. The appellant carried on the same busi-
ness as its predecessor, namely, sale of the produce of 
its distillery to licensed wholesalers. The wholesalers 
in their turn sold the liquor to licensed retailers from 
whom the actual consumers made their purchases. 
The entire trade was largely controlled by Government 
regulations. 
After the war started the demand for com,itry liquor 
increased but difficulty was felt in finding bottles in 
which the liquor was to be sold. In order to relieve 
the scarcity of bottles the Government devised .in 1940 
a scheme called the buy-back scheme. The scheme in 
substance was that a distiller on a sale of liquor be-
came entitled to charge a wholesaler a price for the 
bottles in which the liquor was supplied at rates fixed 
by the Government which he was bound to repay to 
the wholesaler on the latter returning the bottles. The 
(I) S.C.R. 
SUPREME COURT REPORTS 
685 
same arrangement, but with prices calculated at differ-
z95S 
ent rates was made !or the liquor sol~ in bottles by a Punjab Distilling 
wholesaler to a retailer and by a retailer to the consu-
Industries Ltd. 
mers. 
Apparently it was conceived that the price 
v. 
fixed under the scheme would be 

Excerpt shown. Read the full judgment & AI analysis in Lexace.