Statutory contingency reserve treated as deductible from taxable income where the assessee lacks control over the funds.

A contingency reserve created under the governing statute and restricted to a specific statutory purpose was treated as outside the assessee's own control and not available for general use. On that basis, the amount transferred to the reserve was held deductible in computing taxable income and deductible from the assessee's total income.

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Issues: Whether the amount transferred to a contingency reserve created under the governing statute was deductible from the assessee's taxable income.

Analysis: The reserve was created under the statutory scheme applicable to the assessee, could be utilised only for the purpose for which it was constituted, and remained beyond the assessee's control. On those admitted facts, the amount was treated as not being available for the assessee's own use. A statutory reserve of this nature was held to fall for deduction in computing income.

Conclusion: The contingency reserve was deductible from the assessee's total income.

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