Balancing charge is not chargeable to tax: Supreme Court

The assessee purchased bottles and crates costing less than Rs. 5,000/- and was allowed 100% depreciation thereon u/s 32 (1) (ii). When the bottles and crates got worn out, they were sold by the assessee. The question arose whether the said sale proceeds were assessable to tax. Prior to AY 1988-89, the sale proceeds would have been assessable as a “balancing charge” u/s 41 (2). After the deletion of s. 41 (2), the department claimed that depreciation constituted “expenditure” and that the sale proceeds represented a “recoupment of that expenditure” which was chargeable as business ...