| Case ID |
393e3cb9-9503-4586-9a15-100c174af829 |
| Body |
View case body. Login to View |
| Case Number |
Civil Appeal Nos. 5291, 5293 AND 5296 OF 2004, 356 |
| Decision Date |
Jul 06, 2009 |
| Hearing Date |
|
| Decision |
The Supreme Court held that the concept of 'balancing charge' in section 41(2) cannot be read into section 41(1) of the Income-tax Act. The court clarified that each sub-section of section 41 deals with distinct topics and that the deletion of section 41(2) precludes taxing sale proceeds of 100% depreciated assets as business income under section 41(1). Therefore, profits from the sale of bottles and crates purchased prior to 31-3-1995 are not taxable, while those purchased after 1-4-1995 are subject to capital gains tax under section 50 due to their inclusion in the block of assets. |
| Summary |
In the landmark case Nectar Beverages P. Ltd. v. Deputy Commissioner of Income Tax, the Supreme Court of India examined the applicability of sections 41(1) and 41(2) of the Income-tax Act, 1961 concerning the taxation of sale proceeds from depreciable assets. The case arose from a dispute over whether the sale proceeds from bottles and crates, which were fully depreciated, could be classified as business income under section 41(1) following the deletion of section 41(2). The court determined that the provisions of section 41(1) and section 41(2) operate independently, and the deletion of section 41(2) removes the basis for treating the sale proceeds as taxable income. This decision clarifies the distinction between recoupment of trading liabilities and balancing charges, emphasizing the need for precise statutory interpretation in tax matters. The ruling has significant implications for businesses dealing with depreciable assets, ensuring clarity in tax liabilities and compliance with the Income-tax Act. Key terms include 'balancing charge', 'capital gains', and 'depreciable assets'. |
| Court |
Supreme Court of India
|
| Entities Involved |
Not available
|
| Judges |
S.H. Kapadia,
Aftab Alam
|
| Lawyers |
Not available
|
| Petitioners |
Nectar Beverages P. Ltd.
|
| Respondents |
Deputy Commissioner of Income Tax
|
| Citations |
2009 SLD 2622 = (2009) 314 ITR 314
|
| Other Citations |
Nectar Beverages (P.) Ltd. v. Dy. CIT (Asstt.) [2004] 267 ITR 385 / 139 Taxman 70 (Bom.) reversed.
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
41(1),
41(2),
50
|