Pre-acquisition bonus liability was not deductible where the expense had not accrued in the relevant assessment year.

Bonus liability relating to a period before the assessee took over the proprietorship concern was not deductible in the relevant assessment year because the expense had not accrued during that year. The claim was for an earlier accounting period, and commercial expediency could not justify allowance of a liability that arose outside the assessment year. The deduction was therefore not allowable for the assessment year in question.

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Issues: Whether the bonus liability relating to an earlier period, which arose before the assessee-company took over the proprietorship concern, was allowable as a deduction for the assessment year 1974-75.

Analysis: The liability for bonus pertained to the period April 1, 1972, to December 31, 1972, when the business was still carried on as a proprietorship. The claim was made for the assessment year 1974-75, but the liability did not accrue during that year. The mere invocation of commercial expediency could not justify allowance where the expense related to an earlier accounting period and had not arisen in the relevant assessment year.

Conclusion: The deduction was not allowable for the assessment year in question.

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