Regular accounting method for reimbursable business s allows deduction of unreimbursed balance under ceiling-based reimbursement rules.

Consistent accounting treatment of stowing and fire-protection expenses linked to reimbursement under a statutory scheme was accepted as a regular method of accounting. The Tribunal was held not to have ignored relevant materials or relied on irrelevant materials because the assessee had systematically debited the expenditure, credited reimbursements when received, and written off only the unreimbursed balance. Deduction was also sustained for the unreimbursed amount, since the actual expenditure had been incurred and the allowance was worked out under the governing reimbursement rules and ceilings. The fact that reimbursement could fall below the ceiling did not by itself defeat deductibility.

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Issues: (i) Whether the Tribunal ignored relevant materials or relied on irrelevant materials in holding that the assessee had followed a regular method of accounting in respect of stowing and fire-protection expenses. (ii) Whether the expenses, to the extent not actually incurred during the previous year relevant to the assessment year, were allowable as deductions in computing business income.

Issue (i): Whether the Tribunal ignored relevant materials or relied on irrelevant materials in holding that the assessee had followed a regular method of accounting in respect of stowing and fire-protection expenses.

Analysis: The assessee had consistently treated the expenditure as recoverable from the Coal Board, credited reimbursements when received, and written off only the unreimbursed balance. The Tribunal found this treatment to be systematic and consistent year after year. The existence of the mercantile system did not preclude such a regular method for a recurring reimbursement-linked item. The actual expenditure was not doubted, and the Tribunal applied the relevant rules governing reimbursement ceilings.

Conclusion: The Tribunal did not ignore relevant materials or rely on irrelevant materials, and its finding that the assessee followed a regular method of accounting was upheld against the Revenue.

Issue (ii): Whether the expenses, to the extent not actually incurred during the previous year relevant to the assessment year, were allowable as deductions in computing business income.

Analysis: The assessee's practice was to incur the expenditure in different years, debit it to the Coal Board account, and claim only the balance after reimbursement. Since the expenditure was actually incurred and reimbursement was governed by the applicable rules and ceilings, the Tribunal was justified in working out the allowable amount on that basis. The fact that reimbursement might be reduced below the ceiling did not by itself defeat the deduction, because the substantive expenditure had been incurred and the accounting treatment had been consistently followed.

Conclusion: The Tribunal's allowance of deduction to the extent determined by it was justified.

Final Conclusion: The reference was answered against the Revenue on the accounting-method question, and the Tribunal's approach to deductibility of the unreimbursed balance was sustained.

Ratio Decidendi: Where an assessee consistently and systematically treats expenditure as reimbursable under a statutory reimbursement scheme and the actual expenditure is not in dispute, the unreimbursed balance may be allowed in accordance with the regular method of accounting and the governing ceiling rules.

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