Mercantile accounting and lease rent accrual: lump-sum payment did not justify deduction of earlier years' rent in one year.

Under the mercantile system, lease rent accrues year by year where the liability arises under a subsisting lease, and payment in one lump sum does not change the timing of accrual. A dispute only about the quantum of rent does not postpone the obligation to pay. On that basis, the assessee could not claim deduction of the entire lump-sum lease-rent payment in the relevant assessment year.

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Issues: Whether the assessee, following the mercantile system of accounting, was entitled to claim deduction of a lump-sum payment made in the accounting year towards lease rent for earlier years.

Analysis: The payment was found to be rent under a subsisting lease, and the liability to pay such rent accrued year by year. The fact that the amount was discharged in one lump sum during the relevant accounting period did not alter the year-wise accrual of the liability. A mere dispute about the quantum of rent did not postpone the accrual of the obligation under the mercantile system.

Conclusion: The assessee was not entitled to deduct the entire sum of Rs. 77,000 in the relevant assessment year.

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