Sorry for the delay in response! Let me dig up my old copy of the rules. I have the new rules for World At War 85 in my head lately.
Okay first of all mortars May Fire directly at Targets they can see. According to the old rules (what you are using) their damage effect is treated like like high explosive fire missions for offboard artillery, which means they cannot reduce afvs (even light skinned afvs) mortar fire can only disrupt them. And to clarify that means afv targets can't even be reduced if they're already disrupted.
Mortars may fire indirectly if the HQ of their formation, a leader, or Recon unit has a line of sight to the Target hex, and Target hex is within range of the mortar. Same restriction applies for damage to afvs as direct fire.
That's it. The confusion usually arises because in section 8.7 of the rules you are using [ onboard artillery units] the second paragraph gets ignored for mortars. The rule is just awkwardly written.
Enjoy!
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