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Issues involved:
The judgment involves two questions referred by the Tribunal under section 66(1) of the Indian Income-tax Act, 1922. 1. Whether contributions to the insurance fund for 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. 2. Whether the unabsorbed depreciation allowance of the earlier year can be set off against income under other heads. Issue 1 - Contributions to Insurance Fund for Third Party Risk: The assessee, a corporation established under the Road Transport Corporations Act, made contributions to an insurance fund for third party risk as required by the Corporation Rules. The Income-tax Officer disallowed the deduction, stating the amounts were provisions and not ascertained liabilities. The Appellate Tribunal held the contributions were allowable as they were made under a legal obligation imposed by the rules. The High Court agreed, emphasizing the statutory obligation on the assessee to establish and maintain the fund for third party liability. The court cited a similar case where deductions for reserves required to be created by the assessee were allowed. The judgment favored the assessee, allowing the deduction for the contributions made to the insurance fund for third party risk. Issue 2 - Unabsorbed Depreciation Allowance: The second question regarding the set off of unabsorbed depreciation allowance against income under other heads was conceded by the revenue, citing a Supreme Court decision. The High Court affirmed the decision in favor of the assessee based on the precedent set by the Supreme Court case. Conclusion: The High Court answered the first question in the affirmative, allowing the deduction for contributions to the insurance fund for third party risk. The second question was answered in favor of the assessee based on the Supreme Court decision.
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