Contractual liability for transit loss crystallises only on final settlement, not when the accident occurs.

A liability for compensation arising from a truck accident was held to be contractual, not a statutory liability under section 6 of the Carriers Act, 1865, because the owners of the goods had proceeded against the sister concern and there was no material showing authority to bind the assessee. The inter se obligation between the assessee and the sister concern arose from their independent contract, and the arbitrator also treated it as contractual. As the dispute crystallised only when the arbitral award was confirmed, the deduction was allowable only on final settlement, not in the earlier accounting year.

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Issues: Whether the assessee's liability for compensation arising out of the truck accident was a statutory liability under section 6 of the Carriers Act, 1865 and hence deductible in the relevant accounting year, or a contractual liability that crystallised only when the dispute was finally settled.

Analysis: Under the Carriers Act, 1865, the right to claim compensation for loss in transit accrues to the owner of the goods or a duly authorised agent. In the present case, the owners of the goods had proceeded against the assessee's sister concern and not against the assessee. No material showed that the sister concern was authorised by the owners to contract on their behalf with the assessee. The inter se liability between the assessee and the sister concern arose from their independent contract, and the arbitrator also treated the obligation as contractual. Since the dispute was resolved only when the arbitral award was confirmed, the liability did not accrue in the earlier accounting period.

Conclusion: The liability was contractual and not statutory, and it became deductible only when finally ascertained in 1983. The finding disallowing the claim in the relevant year was upheld.

Final Conclusion: The appeal failed because the expenditure claim was held to have crystallised only on final settlement of the contractual dispute and not in the accounting year under consideration.

Ratio Decidendi: A liability arising from an independent contractual arrangement does not accrue for deduction until the dispute is finally settled, even if the underlying loss occurred earlier.

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