Accrued statutory liability is deductible on mercantile principles even when quantified or paid later.

Under the mercantile system, a statutory leave-wage liability under the Beedi and Cigar Workers Act was deductible when it had already accrued under the statutory scheme, even though the exact amount was later quantified by reference to production and paid subsequently. The Court treated the obligation as a present business liability, not a contingent one, because the workers' entitlement arose from the law and notification in force. Subsequent quantification did not postpone accrual. The deduction was therefore allowable in computing business income and the issue was answered in favour of the assessee.

---

---

Issues: Whether the assessee was entitled to deduction of the liability towards leave with wages under the Beedi and Cigar Workers (Conditions of Employment) Act, 1966 for the relevant assessment year.

Analysis: The assessee maintained mercantile accounts. The liability arose from the statutory scheme and the notification issued under the Act, which made the workers entitled to the benefit from 1974 onwards and quantified the amount by reference to 5 per cent of the beedis manufactured. On that basis, the liability was treated as having accrued during the relevant period and was not merely contingent. A statutory liability which has accrued is deductible in computing business income, and the subsequent quantification or disbursement does not postpone the accrual where the obligation already exists under law.

Conclusion: The deduction was allowable, and the question was answered in favour of the assessee.

Final Conclusion: The statutory leave-wage liability, being an accrued business liability under the mercantile system, was deductible for the relevant year.

Ratio Decidendi: A statutory liability that has accrued under law is deductible on mercantile principles even if its exact quantification or payment occurs later.

---