Accrual of transit-damage liability allows a provision deduction when loss and claim arise, even before final settlement.

A provision for claims arising from loss or damage to goods in transit was held allowable when the underlying loss and claim arose in the same accounting year, even if quantification and settlement occurred later. The carrier's liability was treated as accruing on a reasonable apprehension basis under the Carriers Act, 1865, and printed conditions on the consignment note were found insufficient to prove a special contract excluding that liability. A separate claim for additional lorry hire, hire advance, trip advances and spare bill payable to Saradhi Lines required factual verification for the relevant assessment year, and was remanded for examination in accordance with law.

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Issues: (i) Whether the provision made for claims arising from loss or damage to goods in transit was deductible in the year in which the liability arose; (ii) Whether the additional lorry hire, hire advance, trip advances and spare bill payable to Saradhi Lines required fresh examination for the relevant assessment year.

Issue (i): Whether the provision made for claims arising from loss or damage to goods in transit was deductible in the year in which the liability arose.

Analysis: The claims originated during the relevant previous year and were supported by detailed claimant-wise particulars. The liability was treated as having accrued when the loss or damage occurred and the claims were raised, even though quantification and settlement could occur later. The carrier's liability under the Carriers Act, 1865 was considered to arise on a reasonable apprehension basis, and the printed conditions on the reverse of the consignment note were held insufficient to establish a special contract excluding liability.

Conclusion: The provision for claims of Rs. 32,09,670 was allowable, and the disallowance was deleted in favour of the assessee.

Issue (ii): Whether the additional lorry hire, hire advance, trip advances and spare bill payable to Saradhi Lines required fresh examination for the relevant assessment year.

Analysis: The additional ground was admitted because the amount was stated to pertain to the succeeding assessment year, and the Assessing Officer had not examined its admissibility for that year. The matter therefore required factual verification and adjudication at the assessment stage.

Conclusion: The issue was remanded to the Assessing Officer for consideration in accordance with law.

Final Conclusion: The assessee succeeded on the principal claim for provision against transit-damage liabilities, while the additional claim was sent back for fresh examination, leaving the appeal only partly allowed.

Ratio Decidendi: A liability for claims arising from loss or damage to goods in transit accrues when the underlying event and claim arise in the accounting year, and a reasonable provision based on such claims is allowable even if the exact amount is settled later.

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