Accrued sugarcane price liability under a statutory formula is deductible when purchase and price fixation occur, despite later dispute or non-entry.

Under the Sugarcane Control Order, 1955, liability to pay additional sugarcane price under the price-linking formula accrued when sugarcane was purchased and the minimum price had been fixed. That liability was not contingent merely because the assessee followed the mercantile system, disputed the claim, or had not recorded corresponding book entries. The absence of accounting entries could not prevent accrual of a liability that had arisen in law, and later quantification did not postpone its deductibility. On that basis, the accrued additional cane price was allowable as a deduction in the relevant assessment years.

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Issues: Whether the assessee incurred the liability to pay the additional sugarcane price under the price-linking formula during the relevant previous years so as to claim deduction in those assessment years.

Analysis: The liability under paragraph 3(3A) of the Sugarcane Control Order, 1955 arose when sugarcane was purchased and the minimum price under paragraph 3(1) had been fixed. On those facts, the liability accrued in the relevant previous years and was not contingent merely because the assessee maintained mercantile accounts, disputed the claim, or had not made corresponding book entries. The absence of entries in the books could not defeat a liability which had accrued in law. Once the liability was later quantified, the assessee was entitled to deduction of the quantified amount.

Conclusion: The liability accrued in the relevant assessment years and the deduction was admissible in favour of the assessee.

Final Conclusion: The reference was answered in favour of the assessee on the basis that the additional cane price liability accrued when the cane was purchased and the minimum price was fixed, and the subsequent dispute or non-entry in the books did not postpone its accrual.

Ratio Decidendi: A liability under a statutory price-fixing scheme accrues when the event creating it occurs and is not rendered contingent by dispute, absence of book entries, or later quantification; under the mercantile system, an accrued liability is deductible even before actual payment.

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