Accrued business liability allowed for plot development charges under mercantile accounting, with deduction upheld.

Amounts deposited as development charges with the Urban Improvement Trust were deductible under mercantile accounting because the liability to incur those charges had accrued in the relevant assessment years. For a dealer in landed property, expenditure necessary to develop plots and make them saleable is an allowable business deduction when the obligation attaches, even if some spending occurs later and any excess deposit may be adjusted or refunded. The deduction claimed for each year was therefore upheld, and the Revenue's challenge failed.

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Issues: Whether the amounts deposited by a dealer in landed property with the Urban Improvement Trust, being development charges required for sale of plots, were allowable deductions in the relevant assessment years as an accrued liability under the mercantile system of accounting.

Analysis: The assessee followed the mercantile system of accounting and the demand for development charges had been raised by the Urban Improvement Trust as a condition attached to the business of plotting and sale of land. The liability to incur such development expenditure arose in the assessment years in question, even though part of the amount was to be spent later and any excess deposit could be adjusted or refunded. On the principles applicable to dealers in landed property, expenditure necessary for developing the plots and enabling their sale is deductible when the liability has attached, following the rule that accrued business liabilities are allowable under mercantile accounting.

Conclusion: The deduction of Rs. 30,000 in each of the two years was rightly allowed, and the Revenue's appeals fail.

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