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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Year in which deductible Where assessee was following mercantile system, interest payable to bank was allowable in year in which it accrued even if it was not actually paid to bank, on account of its closure [Assessment years 1992-93 & 1993-94] The assessee was following the mercantile system of accounting. During the assessment years 1992-93 and 1993-94, liability to pay a sum of Rs. 33.14 lakhs had accrued in respect of the interest payable to the Bank but on account of the closure of the said bank, the amount could not actually be paid to the said bank. The claim for deduction of amount from the income of the assessee was turned down by the Assessing Officer. Held that the assessee was following mercantile system and it was not denied that the liability to pay interest to the bank accrued in the year pertaining to assessment years 1992-93 and 1993-94. The revenue erred in treating the said liability as having been discharged in the year 1994-95 without considering that in view of the mercantile system of accounting, notwithstanding that this amount was not paid to the bank, in the peculiar facts and circumstances of the case the Assessing Officer ought to have allowed the claim in the year 1992-93 and in the other case in the assessment year 1993-94. A.P. Patankar for the Appellant. S.C Goyal for the Respondent. JUDGMENT S.K. Kulshrestha, J .- Both the above appeals have been filed under section 260A of the Income-tax Act, 1961, against the order of the Tribunal in I.T.A. Nos. 990/Ind/1995, dated November 22, 2002, for the assessment year 1992-93 and 746/Ind/1997, dated April 4, 2003, for the assessment year 1993-94. The questions formulated in I. T. A. No. 34 of 2003 read as under: "(1)Whether the Tribunal was justified in allowing the assessee to claim a deduction of Rs. 33,14,000 on account of an interest said to be payable to the bank SBICI when no such liability accrued during the assessment year in question nor any such provision meeting with that liability was provided in the books of account ? (2)Whether a sum of Rs. 33,14,000 claimed by the assessee by way of deduction in his…

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