Ascertained business liability and plant treatment support deduction of statutory interest and investment allowance claims.

Statutory interest on excess collections credited to the Sugar Cess Fund was treated as an ascertained business liability because the governing scheme fixed the obligation from inception, and under mercantile accounting the liability accrued year to year while the amounts remained with the assessee; the deduction was therefore allowable. A weighbridge, and the scale on the same footing, was regarded as plant, so investment allowance was admissible in principle subject to satisfaction of the remaining statutory conditions. The commentary states that both claims were accepted and the assessee succeeded on the deduction and allowance issues.

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Issues: (i) whether the assessee was entitled to deduction of interest payable on excess realisations credited to the Sugar Cess Fund as an ascertained business liability; and (ii) whether investment allowance was admissible on the weighbridge and scale.

Issue (i): whether the assessee was entitled to deduction of interest payable on excess realisations credited to the Sugar Cess Fund as an ascertained business liability.

Analysis: The liability to refund excess collections with interest arose from the statutory scheme governing the Sugar Cess Fund and the interim arrangement under which the assessee was permitted to realise higher prices. The Supreme Court's later decision in the assessee's own case declared the legal position from inception and showed that the assessee was always liable to pay the prescribed interest on the excess collections. In a mercantile system, such statutory interest accrued year to year while the amounts remained with the assessee, and the liability was not contingent but an existing and quantifiable obligation.

Conclusion: The interest liability was deductible and the disallowance was set aside in favour of the assessee.

Issue (ii): whether investment allowance was admissible on the weighbridge and scale.

Analysis: The weighbridge was treated as plant in view of the jurisdictional High Court decision and its classification in the depreciation schedule under plant and machinery. The scale stood on the same footing for the purpose of the allowance. Accordingly, the conditions for investment allowance were satisfied in principle, subject to verification of the remaining statutory requirements.

Conclusion: Investment allowance on the weighbridge and scale was allowable in favour of the assessee.

Final Conclusion: The appeal succeeded in full, with both the deduction claim and the investment allowance claim accepted.

Ratio Decidendi: Where a statutory liability to pay interest on excess collections is fixed by the governing enactment and the legal obligation is declared from inception by the final court, the liability accrues year to year under mercantile accounting and is deductible as an ascertained liability; equipment functioning as plant is eligible for investment allowance if the statutory conditions are otherwise met.

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