Capital Redumption Fund contributions were held non-deductible, as they were appropriation of profits toward a contractual repayment liability.

Amounts set apart by a co-operative society to a Capital Redumption Fund, created under the terms of financial assistance and used to repay Government share capital in instalments, were not deductible. The obligation arose from contract rather than statute, and the amount was an appropriation from the society's own profits toward its repayment liability. It did not amount to diversion by overriding title because no third-party entitlement attached to the sums, and it was not an allowable loss or expenditure under the income-tax provisions considered. The amount therefore remained part of the assessee's taxable income.

---

---

Issues: Whether the amount set apart by the assessee co-operative society to the Capital Redumption Fund was deductible in computing income, or could be excluded as diversion by overriding title or as an allowable loss or expenditure.

Analysis: The obligation to create the fund arose from the terms of financial assistance and not from the statute itself. The amount was set apart out of the assessee's own profits and was used to discharge its liability to repay Government share capital in instalments. Unlike reserves in the cited electricity cases, the fund did not represent amounts collected for the benefit of others, nor was it unavailable to the assessee for its own purposes in the relevant sense. The payment was an appropriation towards an obligation undertaken by contract, and the assessee retained the benefit of reducing and ultimately extinguishing its liability. The claim was therefore not sustainable as diversion by overriding title, and the amount could not be treated as loss or expenditure under the income-tax provisions relied upon.

Conclusion: The amount set apart to the Capital Redumption Fund was not deductible and formed part of the assessee's taxable income.

---