Workmen's compensation accrues on accident under mercantile accounting, so deduction is not deferred until quantification.

A statutory liability for workmen's compensation accrues when the compensable accident occurs, because the employer's obligation arises on injury caused in the course of employment. The fact that the claims were contested and later quantified by the Commissioner did not make the liability contingent, since section 19 only provides a mechanism for settling disputes about liability or amount and does not defer the existence of the liability itself. On mercantile accounting, an accrued statutory liability is deductible in the relevant accounting year. The article therefore states that the deduction was allowable in the year of accrual and not postponed until adjudication or quantification.

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Issues: Whether the liability towards workmen's compensation accrued in the relevant accounting year so as to be deductible under the mercantile system of accounting, notwithstanding that the claims were contested and had not yet been quantified by the Commissioner.

Analysis: The assessee was a stevedore and, under the Dock Workers (Regulation of Employment) Act, 1948 and the relevant Scheme, the dock workers allotted for loading and unloading were the assessee's employees. Under section 3 of the Workmen's Compensation Act, 1923, the employer's liability arises when personal injury is caused to a workman by an accident arising out of and in the course of employment. Section 19 provides only for settlement by the Commissioner of disputes about liability, amount, or duration of compensation, and does not suspend the existence of the liability itself. The provisions of section 4A also proceed on the footing that compensation becomes due when the injury occurs. Applying the principle that a statutory liability which has arisen in the accounting year is deductible under mercantile accounting, the contested nature of the claim and the later quantification by the Commissioner did not convert the liability into a mere contingent claim.

Conclusion: The liability had accrued in the relevant year and the assessee was entitled to the deduction; the revisional disallowance was not justified.

Ratio Decidendi: Under the mercantile system, a statutory liability to pay workmen's compensation accrues when the compensable accident occurs, and its deductibility is not postponed until the claim is adjudicated or quantified by the Commissioner.

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