Deb, J. - (1.) We are concerned with the assessment year 1962-63 in this reference under Section 256(1) of the I. T. Act, 1961. The accounting year ended on December 31, 1961.
(2.) The assessee is a company. The company was a distributor of petroleum products including petroleum gas for cooking purposes. Petroleum gas was supplied to the company by a "refinery". In earlier years, the company purchased many specially made iron cylinders for the purposes of distributing gas to the consumers. The consumers returned the cylinders to the company after the gas was exhausted. They were refilled again and supplied to the consumers and were returned in the usual way. No revenue expenditure nor any depreciation on the cylinders was claimed or allowed in the past. The company sold the cylinders to the refinery in the accounting year for Rs. 82,19,947 against their original cost of Rs. 1,09,63,754. The refinery continued to supply gas in those very cylinders to the company and the company, in its turn, distributed gas in those cylinders to the consumers.
(3.) The company claimed before the ITO that those cylinders were " returnable packages " within the meaning of that expression used in item M(2)(2)(d)(1) of Pt. I of the Depreciation Schedule. App. I of Rule 5 of the I.T. Rules, 1962. It also claimed that it had incurred a loss of Rs. 27,43,807 on the sale of those cylinders and that this loss should be allowed as deduction either under the aforesaid item or under Section 32(1)(iii) of the I.T. Act, 1961., The ITO did not allow the aforesaid claim for the reasons recorded in the assessment order.;