1991 (6) TMI 19 - HC - Income Tax

Summary

Issues involved:
The judgment addresses two main issues:
1. Whether the assessee is entitled to depreciation on roads under the Income-tax Act, 1961.
2. Whether the provision made towards the pension fund is an admissible deduction under section 37 of the Income-tax Act, 1961.

Depreciation on Roads:
The court, following a previous decision, ruled in favor of the assessee regarding depreciation on roads, stating that the assessee is entitled to depreciation on roads even if they do not constitute machinery or plant. This decision was based on the relevant assessment years of 1978-79 and 1979-80.

Provision for Pension Fund:
Regarding the provision made towards the pension fund, the Appellate Tribunal accepted the assessee's claim in principle, remanding the matter to ascertain the exact amount to be allowed. The Revenue contended that the provision for the pension fund should not be deductible under section 37 due to the absence of an approved fund, citing section 36(1)(iv) of the Act.

Legal Interpretations:
The court discussed the applicability of sections 36 and 37 in relation to superannuation and pension funds. It was argued that while section 36(1)(iv) covers superannuation funds, section 37 allows deductions for expenditures not covered in sections 30 to 36. The court referenced various precedents to support the deduction of contributions made to non-recognized funds under section 37.

Precedents and Decision:
The court highlighted precedents from different High Courts supporting deductions for provisions made towards statutory obligations like pension funds and gratuity. It emphasized the concept of commercial expediency in justifying such deductions, especially for a statutory corporation fulfilling its obligations. The court ultimately upheld the earlier view and ruled in favor of the assessee regarding the deduction for the provision made towards the pension fund.

Conclusion:
The court answered both questions in favor of the assessee, allowing depreciation on roads and confirming the admissibility of the provision made towards the pension fund as a deduction under section 37. The references were answered accordingly, maintaining consistency with previous decisions and legal interpretations.