Mine closure expense provision held allowable as accrued liability despite later quantification under approved closure plan.

A provision for mine closure expenses was treated as an accrued and allowable liability where the mining company's progressive and final closure plans had been approved under the governing regulatory framework. The liability was regarded as arising on approval of the mine closure plan, and the fact that the exact quantification or actual closure had not yet occurred did not defer accrual. Because the assessee's computation basis was not disputed, the provision was allowed and the disallowance was deleted in favour of the assessee.

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Issues: Whether the provision made towards mine closure expenses constituted an accrued and allowable liability, even though the actual closure and final quantification had not yet occurred.

Analysis: The provision was made under the regulatory scheme governing mine closure plans. Under Rules 23A, 23B and 23C of the Mineral Conservation and Development Rules, a mining company is required to submit progressive and final mine closure plans for approval, and the liability is regarded as arising upon such approval. The quantum of the liability may remain uncertain, but that by itself does not postpone accrual where the liability is otherwise definite and based on the approved plan. The basis of the assessee's computation was not disputed.

Conclusion: The provision for mine closure expenses was held to be an allowable accrued liability, and the disallowance was rightly deleted, in favour of the assessee.

Ratio Decidendi: A liability is allowable on accrual when it has become definite under the governing regulatory framework, even if the exact amount is to be paid or quantified later.

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