Crystallisation of statutory liability governs deduction timing when purchase tax demand becomes enforceable and the challenge fails.

Purchase tax liability was deductible only when it became clearly enforceable and crystallised against the assessee. Because the assessee maintained mercantile accounts but was actively disputing the levy, no workable obligation to provide for or pay arose until the statutory demand was quantified, served, and the challenge failed. The principle applied was that, where more than one reasonable view exists on the timing of allowance of a statutory liability, the interpretation favourable to the assessee should be adopted. On the facts, the assessee debited and paid the amount in the year of crystallisation, so the deduction was allowable in that year.

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Issues: Whether purchase tax liability became allowable as a deduction in the year in which the statutory demand was quantified and served, where the assessee maintained mercantile accounts and had challenged the levy.

Analysis: The liability was held to be deductible when it became clearly enforceable against the assessee. The assessee was disputing the levy and was not under a workable obligation to provide for or pay the amount until the demand was quantified and the challenge failed. The decision applied the principle that, where more than one reasonable view is possible on the timing of allowance of a statutory liability, the interpretation favourable to the assessee must be adopted. On the facts, the assessee debited and paid the amount in the year when the liability crystallised, so the deduction could not be refused.

Conclusion: The deduction of purchase tax was allowable in the year under appeal and the assessee succeeded on the substantive issue.

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