Accrued contractual liability for employee annuity was deductible; future enjoyment condition did not make the premium contingent.

Premium paid to LIC to secure a monthly annuity for a retiring employee was treated as discharge of an existing contractual obligation, not as a contingent liability. The liability had already accrued under the partnership arrangement and the policy; retirement was only the condition for enjoyment of the benefit, not the event creating the liability. A future condition affecting payment does not convert an accrued liability into a contingent outgo under mercantile accounting. The payment was therefore allowable as business expenditure, and the assessee succeeded on the issue.

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Issues: Whether premium paid to LIC to secure a monthly annuity for a retiring employee constituted a contingent liability or an expenditure referable to an existing contractual liability and was therefore allowable as a deduction.

Analysis: The payment was made to discharge a contractual obligation under the partnership arrangement and the LIC policy. The liability to provide the annuity existed at the time of payment, while retirement or completion of service was only the condition for enjoyment of the benefit. A future event that may affect the discharge of the liability does not by itself make the liability contingent. On the facts, the premium was not paid to create a mere reserve for an uncertain future event, and the reasoning that treated it as a contingent outgo was inconsistent with the governing principles on accrued liabilities and deductible expenditure under mercantile accounting.

Conclusion: The payment was an allowable business expenditure and not a contingent liability; the assessee succeeded on the issue.

Final Conclusion: The Tribunal's view was set aside and the appellate authority's order was restored, resulting in relief to the assessee.

Ratio Decidendi: A liability that has already accrued under a contractual obligation is not rendered contingent merely because its actual enjoyment or discharge depends on a future condition subsequent.

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