Depreciation and statutory pension fund contributions remained deductible despite prior cost claim and double deduction objections.

Depreciation on fixed assets could not be denied merely because the asset cost or related expenditure had been claimed in an earlier year, as Explanation 5 to section 32(1) permits depreciation even if not separately claimed in computing income. A contribution made under a statutory requirement to a pension or reserve fund was also treated as a deductible liability, since Rule 10 required the fund to be created and used for employee benefits. Both deductions were therefore upheld and the revenue's challenge failed.

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Issues: (i) Whether depreciation on fixed assets could be disallowed on the ground that the expenditure on such assets had already been claimed or absorbed in an earlier year, resulting in a double deduction; (ii) Whether contribution to the pension fund was a deductible statutory liability.

Issue (i): Whether depreciation on fixed assets could be disallowed on the ground that the expenditure on such assets had already been claimed or absorbed in an earlier year, resulting in a double deduction.

Analysis: Explanation 5 to sub-section (1) of Section 32 of the Income-tax Act, 1961 provides that depreciation is allowable whether or not the assessee has claimed it in computing total income. The statutory language removes the basis for denying depreciation merely because the asset cost or related expenditure had been claimed earlier.

Conclusion: The disallowance of depreciation was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether contribution to the pension fund was a deductible statutory liability.

Analysis: Rule 10 of the Madhya Pradesh Krishi Upaj Mandi (State Marketing Development Fund) Rules, 2000 requires creation and use of a reserve fund for pension and allied employee benefits. The contribution was therefore made pursuant to a statutory obligation and not as a voluntary or inadmissible outlay.

Conclusion: The contribution to the pension fund was rightly allowed as a deduction and the issue was decided in favour of the assessee.

Final Conclusion: Both substantial questions were answered against the revenue, and the appeal was rejected as lacking merit.

Ratio Decidendi: Where the statute expressly permits depreciation irrespective of prior claim, and where a payment is made under a statutory obligation to a reserve or pension fund, the deduction cannot be denied on the ground of double benefit or non-revenue nature.

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