1975 (8) TMI 23

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....1,575, Rs. 3,83,600 and Rs. 3,64,700, representing the contributions to the insurance fund made in accordance with rule 11 of the Corporation Rules in respect of third party risk were admissible as a deduction in computing the income of the assessee for the assessment years 1956-57, 1957-58, 1958-59 and 1959-60, respectively ? (2) Whether, on the facts and the circumstances on this case, the unabsorbed depreciation allowance of the earlier year deemed to be a part of depreciation allowance of the current year under proviso (b) to section 10(2)(vi) of the Act can be set off, unlike other business losses, against income under other heads ? " At the outset, it may be stated that, so far as question No. 2 is concerned, it was conceded by ....

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....r assets including vehicles, and in this reference we are concerned only with those contributions which were made by the assessee to this insurance fund for third party risk. In the four accounting periods relevant to the four assessment years in question, the assessee made contributions of Rs. 4,30,000 (assessment year 1956-57), Rs. 4,21,575 (assessment year 1957-58), Rs. 3,83,600 (assessment year 1958-59) and Rs. 3,64,700 (assessment year 1959-60) to the insurance fund relating to third party risk. In each of these years the assessee claimed a deduction in respect of these contributions so made to the insurance fund relating to third party risk. The Income-tax Officer disallowed the claim for all these years on the ground that these amoun....

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....he State Government has framed what are called The Bombay State Road Transport Corporations Rules, 1952. Rule 11 of these Rules is material and it runs thus : " Third party liability fund.--There shall be established and maintained by the Corporation a fund to be called the Third Party Liability Fund into which shall be paid every year from and out of the revenues of the Corporation such sum as may be directed by the State Government from time to time for meeting any liability, arising out of the use of any vehicle of the Corporation, which the Corporation or any person in the employment of the Corporation may incur to third parties. " It will thus appear clear that under this statutory rule, which has been framed by the State Governm....

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.... such contributions to the insurance fund for the purpose of covering third party risk " from and out of the revenues of the Corporation " and, that being the position under the relevant rule, it is difficult to appreciate how the Appellate Assistant Commissioner took the view that these amounts were in the nature of debits to the insurance fund by way of appropriation of profits after they had been earned. The Tribunal, in our view, was, therefore, right in allowing the deduction claimed by the assessee-Corporation in respect of these contributions. If necessary, we may refer to a judgment of this court in the case of Amalgamated Electricity Co. Ltd. v. Commissioner of Income-tax [1974] 97 ITR 334 (Bom), where also a similar question pe....