Mercantile deduction denied where sales tax liability was neither accrued nor legally enforceable.

A deduction under the mercantile system is allowable only when the liability has definitely arisen and is ascertained and enforceable. Here, the additional sales tax debit could not be claimed because the amendment creating the liability had already been declared ultra vires, so no valid law imposed any enforceable obligation on the assessee. The amount was therefore neither accrued nor legally payable, and was not a proper deduction. Arguments based on retrospective amendment decisions were inapplicable because that issue had not been raised before the Tribunal.

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Issues: Whether the sum of Rs. 10,692, representing additional sales tax debited when no valid amendment then existed, was an admissible deduction under the mercantile system of accounting.

Analysis: A deduction under the mercantile system can be claimed only when the liability has definitely arisen and is ascertained and enforceable. On the relevant date, the sales tax amendment under which the debit was made had already been declared ultra vires, and there was no valid law casting any liability on the assessee to pay the additional tax. The liability was therefore neither accrued nor legally enforceable, and could not be treated as a proper debit. The decisions relied on concerning retrospective amendments did not assist the assessee because no such question had been raised or founded before the Tribunal in the present reference.

Conclusion: The deduction was not admissible and the question was answered in the negative, against the assessee.

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