Mercantile accrual of coal liability follows delivery, and later invoices do not defer deduction

Under the mercantile system, liability for the coal price accrued on delivery because there was no agreement postponing payment, and delivery and payment are concurrent conditions in the absence of a contrary contract. The coal had been supplied and consumed in the accounting year ending 31 October 1943, and that admitted fact was sufficient to show that the expenditure was incurred in that year. Later receipt of invoices did not defer accrual of the liability. The expenditure was therefore treated as belonging to the earlier accounting year and could not be deducted in the relevant year. The reference was answered against the assessee.

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Issues: Whether the expenditure on coal was incurred before 31 October 1943 and whether the liability to pay the price had arisen or was ascertainable before that date.

Analysis: The coal had been supplied and consumed in the accounting year ending 31 October 1943, and that fact stood admitted before the authorities. An admission is evidence sufficient to support the finding that the expenditure was incurred in that earlier year. On the question of liability, in the absence of any agreement to the contrary, delivery of goods and payment of price are concurrent conditions under Section 32 of the Sale of Goods Act, 1930. As the assessee kept its accounts on the mercantile basis, the liability for the coal price had accrued in the earlier year, and the mere receipt of invoices later did not postpone the accrual of the liability.

Conclusion: The expenditure was incurred before 31 October 1943 and the liability was ascertainable before that date. The reference was answered in the affirmative, against the assessee.

Final Conclusion: The coal purchase was a liability of the earlier accounting year and could not be deducted in the relevant year merely because the invoices were received later.

Ratio Decidendi: Under the mercantile system, where goods are supplied without any agreement postponing payment, the liability to pay accrues on delivery, and an admitted fact may furnish sufficient evidence of prior incurring of expenditure.

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