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section 145 of the income-tax act, 1961-method op accounting-payment of employees' contribution under employees provident funds act, 1952-whether payment of contributions relating to the period from february, 1962 to february, 1970 made in financial year 1971-72 was allowable as deduction in the assessment year 1972-73 -held, no, because quantification of liability took place prior to the financial year 1971-72 Facts The assessee maintained its account on mercantile system and followed financial year as its accounting period. The Regional Provident Fund Commissioner passed an order requiring the assessee to pay the provident fund contributions of its employees for the period from February 1962 to February 1964. Not accepting its liability, the assessee filed a suit and a writ petition and the proceedings were ultimately terminated against the assessee on 26-10-1970 and 4-2-1971 respectively. The assessee, thereafter, made payment of the contribution relating to the period from February, 1962 to December, 1970 during the financial year 1971-72, which was the relevant accounting period for the assessment year 1972-73 and then, claimed deduction as an allowable expense for the assessment year 1972-73. The Tribunal rejected the claim. On reference: Held Since the assessee maintained its account on mercantile system, the liability became an expense the moment it accrues. The final adjudication and consequent quantification of liability took place either on 26-10-1970 or on 4-2-1971 when the proceedings in suit and in writ petition were ultimately terminated. Both these dates were outside the accounting period relevant for the assessment year 1972-73 and, therefore, deduction was not allowable. JUDGMENT Satish Chandra C.J.-The assessee is a registered firm. It had to pay a sum of Rs. 16,486 as employees' contribution under the Employees' Provident Funds Act, 1952, for the period 1962 to December, 1970. It claimed this amount as an allowable expense in the assessment year 1972-73 for which the financial year 1971-72 was the accounting period. It appears that on 17th August, 1965, the Regional Provident Fund Commissioner passed an order requiring the assessee to pay…

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