Statutory future liability reserve not deductible, but actual insurance expenditure must be separately examined for allowance.

A contribution to a transport corporation's own insurance fund for future accident liabilities was treated as a reserve for a statutory future liability and was not deductible as revenue expenditure. The court distinguished that position from actual insurance liability incurred during the year, holding that the amount actually paid towards such liability had to be separately examined for deduction. The Assessing Officer was therefore required to determine the deductible portion of the actual expenditure, while the provision made merely towards the fund was disallowed.

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Issues: Whether the amount set apart by the transport corporation towards its own insurance fund for future accident liabilities was deductible as revenue expenditure, and whether the assessee was entitled to deduction only of the actual amount paid towards insurance.

Analysis: The contribution to the insurance fund was made to satisfy a statutory obligation under the Motor Vehicles Act and, following the earlier binding decision, such provision by itself was not deductible as revenue expenditure. On the facts, however, the assessee had also incurred actual insurance liability during the relevant year, and the amount actually paid towards that liability had to be considered for deduction. The Assessing Officer was therefore required to determine the extent of expenditure that was in fact allowable on the basis of actual payment.

Conclusion: The question of law was answered in favour of the Revenue, but the matter was remitted to the Assessing Officer for determination of the deductible amount of actual expenditure.

Ratio Decidendi: A contribution to a reserve or fund created to meet a statutory future liability is not deductible as revenue expenditure, but actual expenditure incurred towards the liability must be separately examined for allowance.

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