2009 INSC 1136
                                    SUPREME COURT OF INDIA

                          Commissioner of Income Tax, Udaipur Rajasthan

                                                      Vs.

                                           Mcdowell & Co. Ltd.

                                           C.A.No.3511 of 2007

                        (Dr. Arijit Pasayat and Dr. Mukundakam Sharma JJ.)

                                                  08.05.2009

                                                JUDEMENT

Dr.Arijit Pasayat, J.

1. Questioning correctness of the judgment rendered by a Division Bench of the Rajasthan
High Court at Jodhpur, this appeal has been filed.

2. The assessment year involved was 1991-92. The questions raised before the High Court
are as follows:

        "1. Whether on the facts and in the circumstances of the case, the ITAT was justified
        in holding that he unpaid amount of bottling fee has, on furnishing of the bank
        guarantee to be treated as actual payment and accordingly allowing the deduction in
        respect of the same under Section 43B of the Act, even though the sum has not been
        actually paid before the due date of filing the return under Section 139(1) of the Act?

        2. Whether on the facts and in the circumstances of the case, the ITAT was justified in
        allowing the depreciation on research and development assets which related to the
        closest business of fast food division/unit of the assessee company as such not used
        during the previous year?"

3. The dispute in essence related to the applicability of Section 43B of the Income Tax Act,
1961 (in short the `Act') The High Court held that the said provision has no application.

4. The High Court following its earlier view in respect of the assessment year 1988-89 held
that the amount of bottling fees which remain unpaid did not attract applicability of Section
43B of the Act. The same question has been considered by us in Civil Appeal No.3471 of
2007 disposed of separately today. The view expressed in relation to Section 43B of the Act
applies to this case also. The first question has therefore to be decided against the revenue.

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5. Coming to the second question, it relates to claim of depreciation on research and
development assets. Stand of the revenue is that machinery in respect of R & D centre related
to the fast food unit which was closed and therefore the assessee was not entitled to any
depreciation because there was no actual user of the machinery.

6. Stand of the assessee on the other hand is that the machinery was used in respect of both
the fast food and the liquor units. This aspect needs to be factually examined.

7. We find that the basic issue as to whether it related to both the units or only to fast food
unit which is admittedly closed has not been examined in detail. We, therefore, remit the
matter to the Assessing Officer to examine this aspect. The assessee shall be permitted to
place material in support of its claim that the machinery was used for both the units. If it is
established by material that whole or part of the machinery was being used for the liquor
unit, whether partly or fully in respect of those machineries, the deduction can be made, as
permissible in law otherwise not. The matter is therefore remitted to the assessing officer for
doing necessary exercise.

8. The appeal is disposed of accordingly.

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