Accrued excise duty liability remains deductible despite dispute or later appellate developments under mercantile accounting

A provision for central excise duty on corrugated fibre containers was deductible as a business expense under the mercantile system because the liability had accrued in the relevant accounting years. The dispute over enforceability did not make the liability contingent, and later High Court or Supreme Court developments could not retrospectively convert an accrued liability into a non-deductible one. The deduction was therefore upheld for the relevant assessment years.

---

---

Issues: Whether the provision made towards the assessee's liability for central excise duty on corrugated fibre containers was an allowable business deduction for the relevant assessment years, notwithstanding the pending dispute and later appellate developments.

Analysis: The provision related to excise duty liability that had arisen in the relevant accounting years. The liability was under dispute, but it had not ceased or been remitted during those years. The later High Court and Supreme Court developments could not convert an accrued liability into a contingent one for the purpose of the relevant assessments. The principle applied was that a liability which has already accrued remains deductible under the mercantile system, even if its quantification or enforceability is later contested or altered by subsequent events.

Conclusion: The provision for excise duty on corrugated fibre containers was allowable as a business deduction and the assessee's claim was upheld.

Ratio Decidendi: A liability that has accrued in the relevant accounting year does not become contingent merely because its enforceability is disputed or because a later event may extinguish it; such a subsequent event does not defeat deduction of the accrued liability.

---