Depreciation on government-transferred assets allowed; insurance fund contribution disallowed; interest deduction remitted under section 37.

Depreciation was held allowable on assets transferred by the Government even though no registered deed of conveyance existed, following the Court's earlier ruling on the same issue. The contribution to the insurance fund, including the initial contribution, was not treated as deductible and was not accepted as a contingent liability, in line with the earlier decision involving the same assessee. The claim for deduction of interest on a loan taken from the State Government was not confined to section 36(1) and had to be examined under section 37 of the Income-tax Act, 1961, so the matter was remitted to the Tribunal for reconsideration.

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Issues: (i) whether depreciation was allowable on assets transferred by the Government without a registered deed of conveyance; (ii) whether the contribution to the insurance fund and the initial contribution thereto were deductible and whether such contribution constituted a contingent liability; (iii) whether the claim for deduction of interest on the loan taken from the State Government required consideration under section 37 of the Income-tax Act, 1961.

Issue (i): Whether depreciation was allowable on assets transferred by the Government without a registered deed of conveyance.

Analysis: The question was treated as covered by an earlier decision of the Court on the same issue, under which depreciation was held admissible notwithstanding the absence of a registered conveyance deed.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether the contribution to the insurance fund and the initial contribution thereto were deductible and whether such contribution constituted a contingent liability.

Analysis: The issue was treated as governed by an earlier decision involving the same assessee, where similar deductions had been disallowed and the contribution was not accepted as deductible on the assessee's claim.

Conclusion: The issue was answered in favour of the Revenue.

Issue (iii): Whether the claim for deduction of interest on the loan taken from the State Government required consideration under section 37 of the Income-tax Act, 1961.

Analysis: The Court applied the same course as in the assessee's earlier matter, holding that although deduction under section 36(1) was not available, the claim had to be examined under section 37.

Conclusion: The matter was remitted to the Tribunal for consideration under section 37 of the Income-tax Act, 1961.

Final Conclusion: The assessee succeeded on depreciation, failed on the insurance fund deductions, and the interest deduction claim was sent back for reconsideration under the residuary business expenditure provision.

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