Accrued liability for additional cane price remains deductible when liability arises and only quantification is deferred.

Clause 5A of the Sugarcane (Control) Order, 1966 was treated as creating a statutory liability to pay additional cane price once the grower supplied the requisite cane, with the Second Schedule governing only later quantification. The phrase "if found due" was read as referring to ascertainment of the amount, not to postponement of the liability itself. On the mercantile system, that accrued liability was deductible in the accounting year even though exact computation was completed later. The additional cane price was therefore held to be an accrued, not contingent, liability, and the deduction was allowable.

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Issues: (i) Whether the additional cane price payable under Clause 5A of the Sugarcane (Control) Order, 1966 accrued in the accounting year and was deductible under the mercantile system of accounting, notwithstanding that the precise quantum was determined later.

Analysis: Clause 5A fastened a statutory liability on the sugar producer to pay additional price in addition to the minimum cane price, and the Second Schedule supplied the formula for computation. The expression "if found due" was read as referring to quantification of the amount, not to postponement of the liability itself. Once the grower had supplied the requisite quantity of cane, the liability arose in praesenti, while only its ascertainment remained to be done. Under the mercantile system, an accrued liability is deductible even if exact quantification is completed later. The view was supported by the consistent line of authority of the jurisdictional High Court and by analogous decisions of the Calcutta High Court.

Conclusion: The additional cane price was an accrued and not a contingent liability, and the deduction was allowable in the accounting year. The answer is in favour of the assessee.

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