The assessee requested the landlord and the brand owners remission in rent due to the store’s poor performance. Pending negotiation with the landlord and the brand owners, the lease rent was not paid earlier, and the final settlement was reached during the impugned assessment year. Accordingly, the lease rent agreement was modified, and the revised licence fee has been mutually agreed upon and countersigned by both parties. During the assessment proceedings, the AO disallowed the amount as the expenditure belonged to the earlier year. The Tribunal held that what is relevant to determine is the crystallization of liability (when the amount has become due and payable). The AO has not questioned the commercial expediency and the nature of the business expenditure. The tax rates and deductions are the same for the prior and current year, creating a tax-neutral situation. It is clear from the facts that the payments were not made in the earlier year pending negotiations, and the payment was only made on the final settlement. Further, these expenses were booked in the accounts in the financial year and taxes are deducted and deposited in the financial year and not in the earlier assessment year. Therefore, liability crystallized during the year, and the same should be allowed in the hands of the assessee.  (AY. 2010-11)