Statutory liability crystallising later is deductible in the year it is determined and paid, even for an earlier period.

Society commission paid to a cane growers' co-operative society was treated as a statutory liability under the UP Sugarcane (Regulation of Supply and Purchase) Act, 1953. As the liability crystallised only on the statutory order and was paid in the relevant assessment year, the expenditure was allowable in that year despite relating to an earlier period. The disallowance was therefore not sustainable and the claim was allowed in favour of the assessee.

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Issues: Whether society commission paid to the cane growers' co-operative society, though relating to an earlier period, was allowable in the year of payment after the liability crystallised under the statutory order.

Analysis: The commission was treated as a statutory obligation arising under the UP Sugarcane (Regulation of Supply and Purchase) Act, 1953 and was crystallised by the order dated 19.06.2012. The liability was not disputed in principle and the payment was made in the relevant assessment year. On these facts, the expenditure was considered allowable in the year in which the statutory liability stood determined and discharged.

Conclusion: The disallowance was not sustainable and the claim was held allowable in favour of the assessee.

Ratio Decidendi: A liability that is statutory in nature and crystallises in a later year is allowable in that year when it is determined and paid, even if it pertains to an earlier period.

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