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Issues:
1. Addition of carrying charges receivable from Punjab Spinning & Weaving Mills Ltd. 2. Accrual of income based on disputed amount. 3. Applicability of the decision in the case of State Bank of Travancore to the present case. Detailed Analysis: 1. The appeal was against the addition of Rs. 77,339 as carrying charges receivable from Punjab Spinning & Weaving Mills Ltd. The Assessing Officer added this amount to the income of the assessee based on the mercantile system of accounting, even though the amount was under dispute and not taken to the Profits & Loss account but to the suspense account in the balance sheet. 2. The main issue was whether the disputed amount of carrying charges had accrued to the assessee. The assessee argued that the amount did not accrue due to the dispute with the other party, supported by legal notices exchanged. The Tribunal referred to the decision in the State Bank of Travancore case, where interest on 'sticky' advances was held to be taxable income as it had accrued according to the mercantile system of accounting. However, the Tribunal distinguished the present case as the right to receive the amount was in dispute, and income cannot be said to have accrued until the right to receive it is settled. 3. The Tribunal further relied on the decision in the case of CIT v. Hindustan Housing & Land Development Trust Ltd., emphasizing that income does not accrue until the right to receive it is settled. The Tribunal concluded that the disputed amount of carrying charges did not accrue to the assessee due to the ongoing dispute with Punjab Spinning & Weaving Mills Ltd. Therefore, the Tribunal directed the Assessing Officer to delete the addition in dispute, allowing the assessee's appeal. The Tribunal found that the disputed amount should not be added to the income of the assessee based on the principles of accrual of income and the ongoing dispute with the other party.
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