Mercantile accounting allowed deduction for land revenue liability when settlement was communicated after year-end and accounts remained open.

Under the mercantile system, a provision for land revenue and allied charges was allowable where the final settlement was communicated immediately after the close of the accounting period and the relevant accounts remained open. The Tribunal accepted that the liability had crystallised in time for the assessee to make a provision in the year concerned, and the deduction was therefore admissible for the assessment year 1973-74. The question was answered in the affirmative, in favour of the assessee.

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Issues: Whether the assessee was entitled to claim deduction of land revenue and allied charges for the assessment year 1973-74 under the mercantile system of accounting.

Analysis: The Tribunal found that the final settlement had been communicated to the assessee immediately after the close of the accounting period and that the accounts for the year were still open. On that basis, a provision was made for the liability. The issue was whether such provision was allowable as a deduction in the relevant assessment year.

Conclusion: The deduction was rightly allowed and the question was answered in the affirmative, in favour of the assessee.

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