Deduction for road reserve denied where the amount was only a contingent provision, not an existing enforceable liability.

A reserve of Rs. 50,000 set aside for roads was not deductible because it was not shown to arise from any undertaking incorporated in the sale deeds, and no expenditure had actually been incurred in the relevant or subsequent year. The amount was treated only as a provision for possible future outlay that the assessee could postpone or avoid, so it was not an existing liability enforceable in law. In mercantile accounting, deduction is allowed only for liabilities that are existing, ascertained and legally enforceable, not for contingent reserves. The amount was therefore disallowed as a deduction.

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Issues: Whether the sum of Rs. 50,000 reserved for roads represented an enforceable and ascertained liability deductible in computing the assessee's income.

Analysis: The amount was not shown to have been incurred under any undertaking incorporated in the sale deeds, and no expenditure had in fact been incurred in the relevant year or the subsequent year. The reserve was only a provision for a possible future outlay, which the assessee could postpone or avoid, and therefore it did not constitute an existing liability capable of enforcement in a court of law. In mercantile accounting, deduction is allowable only for a liability actually existing and ascertained, not for a mere contingent or provisionary reserve.

Conclusion: The sum of Rs. 50,000 was not an enforceable or ascertained liability and was not allowable as a deduction; the answer was against the assessee.

Ratio Decidendi: For income-tax purposes, a deduction is permissible only where the liability is existing, ascertained, and legally enforceable, and not where the amount is merely set aside as a reserve for a contingent future expenditure.

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