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Issues Involved:
1. Deduction of Rs. 11,712 on account of contribution to the insurance fund against third party risk. 2. Conflict between section 10(2)(vi) and rule 8 of the Indian Income-tax Rules, 1922. 3. Entitlement to depreciation of Rs. 2,80,363 for the period April 1, 1960, to April 30, 1960, in respect of assets transferred to the Gujarat State Road Transport Corporation. Summary: Issue 1: Deduction of Rs. 11,712 on account of contribution to the insurance fund against third party risk Mr. Joshi, representing the Commissioner, conceded that the question regarding the deduction of Rs. 11,712 on account of contribution to the insurance fund against third party risk should be answered in the affirmative and in favor of the assessee, based on a previous decision by the Division Bench of the court in CIT v. Bombay State Transport Corporation [1977] 106 ITR 303. Issue 2: Conflict between section 10(2)(vi) and rule 8 of the Indian Income-tax Rules, 1922 The Tribunal upheld the assessee's contention that the portion of rule 8(2) which provides for nil per cent depreciation for assets held for 30 days or less was beyond the rule-making power conferred by section 59. It was held that this portion of the rule conflicted with section 10(2)(vi), which mandates some depreciation for the specified assets. The Tribunal's decision was based on the principle that depreciation is essential for determining true profits, and a rule providing nil depreciation would violate the purpose of section 10(2)(vi). The High Court agreed with this view, stating that even if two views were possible, the one favorable to the assessee should be adopted. Issue 3: Entitlement to depreciation of Rs. 2,80,363 for the period April 1, 1960, to April 30, 1960, in respect of assets transferred to the Gujarat State Road Transport Corporation The Tribunal found that the assessee was entitled to claim depreciation for the one-month period before the assets were transferred to the Gujarat State Road Transport Corporation. The Tribunal rejected the department's argument that the agreement between the two corporations to claim depreciation proportionately was not binding on the department. The Tribunal also dismissed the application of section 10(4B) as there was no sale of assets. The High Court upheld the Tribunal's decision, affirming that the assessee was entitled to depreciation for the period in question. Conclusion: - Question No. 1: Answered in the affirmative and in favor of the assessee. - Question No. 2: Answered in the affirmative, clarifying that the conflict pertains to the portion of rule 8 providing nil per cent depreciation for assets held for 30 days or less. - Question No. 3: Answered in the affirmative and in favor of the assessee. The parties were ordered to bear their own costs of the reference.
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