Nectar Beverages (P) Ltd. v. Dy CIT
INCOME TAX ACT, 1961
Capital gains - Computation -Sale of scrap bottle and crates
Assessee received a sum on sale of scrap bottles and crates during assessment year 1998-99. It separated sale proceeds into two parts:for bottles and crates purchased prior to 31-3-1995 and those purchased after 1-4-1995, sale proceeds relating to bottles and crates purchased prior to 31-3-1995 were not offered for short-term capital gains on ground that assets stood depreciated at 100 per cent under proviso to section 31(1)(ii) and, hence, did not form part of block of assets. Department treated sale proceeds as business income of assessee under section 41(1). Held: Bottles and crates were costing less than Rs. 5,000 purchased prior to 31-3-1995 did not form part of block of assets and, hence, after deletion of section 41(2) profit on sale of such assets was not taxable either as a balancing charge under section 41(1) or as capital gain under section 50. However, on account of deletion of proviso to section 32(1)(ii) vide Finance Act, 1995, bottles and crates purchased after 1-4-1995 formed part of block of assets and, therefore, such assets were liable to capital gain tax under section 50.
Income-tax Act, 1961, Section 50
A.Y. : 1990-91 to 1998-99
Decision: In favour of assessee.
INCOME TAX ACT, 1961
Business income - Profits chargeable to tax under section 41(1) -Applicability of section 41(1) vis--vis section 41(2)
Assessee purchased bottles and crates whose cost per unit were below than Rs. 5,000 and, thereupon allowed 100 per cent depreciation on cost thereof. Assessee sold scrap of bottles and proceeds from it were shown as miscellaneous income in subsequent years. Department, notwithstanding deletion of section 41(2), held that sale proceeds of 100 per cent depreciated and written off assets could treated as business income under section 41(1). Held: Concept of balancing charge as per prescribed under section 41(2) cannot be read into section 41(1), therefore, after deletion of section 41(2), order of AO to entitled tax sale proceeds of 100 per cent depreciated and written off assets as business income of assessee under section 41(1) was not justified as sub-sections of section 41 deals with different and distinct topics and one cannot read recoupment under one sub-section into another.
Income-tax Act, 1961, Section 41(1)
A.Y. : 1990-91 to 1998-99
Decision: In favour of assessee.