Accrual of salary liability turned on a later settlement that superseded the industrial award, favouring the assessee.

Liability for the additional salary did not accrue on the award date because the parties later entered into a written settlement that modified and superseded the industrial award. The assessee paid the amount under that settlement in the relevant assessment year, so the operative liability arose only in that year and not on 31 July 1970. The timing of finality of the award was therefore immaterial to the tax question, and the issue was decided in favour of the assessee.

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Issues: Whether the assessee's liability to pay additional salary of Rs. 80,663 accrued on 31 July 1970 under the industrial award, or only during the relevant accounting year when the parties entered into a subsequent settlement.

Analysis: The assessee had paid the additional salary in the relevant assessment year under a written settlement dated 12 December 1970, which modified the earlier award. The liability was not found to have been paid strictly in terms of the award alone, and the parties had treated the award as having been superseded by a fresh settlement. On those facts, the question of when the award became final was held to be immaterial to the tax issue, because the operative liability arose from the later settlement and not from the award date itself.

Conclusion: The liability did not accrue on 31 July 1970; it arose in the relevant assessment year, and the issue was answered in favour of the assessee.

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