Accrued statutory liability for hank yarn obligation is deductible when it crystallises, even if discharged in a later year.

A provision for hank yarn obligation was deductible in the relevant assessment year because the statutory liability had accrued and crystallised during that year. A circular extending the time for actual discharge only postponed performance; it did not make the liability contingent. On mercantile principles, an accrued liability that can be estimated with reasonable certainty remains allowable even if paid later. The Revenue's challenge therefore failed, and the deduction was allowed.

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Issues: Whether the provision made for hank yarn obligation, being a statutory liability postponed for actual discharge to the next year, was allowable as a deduction in the relevant assessment year.

Analysis: The assessee was under a statutory obligation to fulfil the hank yarn requirement during the year, and the Textile Commissioner's circular merely extended the time for performance. The liability had therefore already arisen and crystallised in the accounting year, though actual quantification depended on the market price at the time of later purchase. On mercantile principles, an accrued liability that is capable of being estimated with reasonable certainty is deductible even if it is discharged in a subsequent year. The mere postponement of performance did not convert the liability into a contingent one.

Conclusion: The provision for hank yarn obligation was deductible in the assessment year in question, and the Revenue's challenge failed.

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