Matching principle limits deduction for consumables where cost was deferred in books and only current-year write-off was claimed.

Expenditure on catalysts and heat transfer medium, having limited life and requiring replacement, was recognised on the matching principle over the period of use rather than as a full current-year deduction. In mercantile accounting, expenses must be matched with the income to which they relate, and regularly maintained audited books are relevant evidence unless shown to be incorrect or unlawful. Because the assessee itself deferred the cost over the useful life of the items, deduction for the year was confined to the amount actually debited in the Profit and Loss Account. The items were treated as consumables and not capital assets, but the current-year claim was limited to the write-off recorded in the books.

---

---

Issues: Whether the expenditure on catalysts and heat transfer medium was deductible as revenue expenditure in full for the year, or whether deduction was allowable only to the extent actually debited in the books for that year.

Analysis: The expenditure related to catalysts and heat transfer medium having limited life and requiring replacement over time. The accounting treatment adopted by the assessee allocated the cost over the period of use on the matching principle, so that expenditure was recognised in the same periods in which the corresponding revenue accrued. In mercantile accounting, income and the expenses attributable to that income must be matched for the relevant year, and annual profits must be computed on that basis. The entries in the regularly maintained and audited books were treated as relevant evidence and could not be discarded in the absence of material showing them to be incorrect or contrary to law. On the facts, the full expenditure could not be allowed in the year under appeal because the assessee itself had deferred the cost over the useful life of the items.

Conclusion: The expenditure was not allowable in full in the year under appeal, and deduction was confined to the amount actually debited in the Profit and Loss Account for that year. The finding that the items were consumables and not capital assets was affirmed, but the Revenue succeeded to the extent of limiting deduction to the current-year write-off.

---