Accrued statutory wage liability is deductible when provided for in mercantile accounts, even if payment is deferred.

A statutory liability for holiday wages and leave with wages under the Bidi and Cigar Workers (Conditions of Employment) Act, 1966, was treated as deductible where it had accrued during the relevant accounting year and was properly provided for in mercantile accounts. The dispute turned on accrual, not mere quantification: the liability was not contingent, and actual payment could be deferred without defeating deduction. Applying its earlier decisions, the Madhya Pradesh HC accepted the provision as an ascertained statutory liability and allowed the deduction in computing income, in favour of the assessee and against the Revenue.

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Issues: Whether the assessee's liability for holiday wages and leave with wages under the Bidi and Cigar Workers (Conditions of Employment) Act, 1966, was an ascertained statutory liability deductible in computing income.

Analysis: The liability had arisen during the relevant accounting year under the statutory scheme governing holiday wages and leave with wages. The assessee maintained its accounts on the mercantile system and had made provision for the liability in its books. The dispute was not about quantification but about whether the liability had already accrued and was, therefore, allowable as a deduction. The Court treated the matter as settled by its earlier decisions applying the principle that a statutory liability incurred during the relevant year is deductible when properly provided for in mercantile accounts.

Conclusion: The liability was an ascertained statutory liability and was deductible in computing the assessee's income; the question was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: A statutory liability that accrues during the relevant accounting year and is provided for in mercantile accounts is an allowable deduction, even if actual payment is deferred, provided the liability is not merely contingent.

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