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TMI Blog1990 (12) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... lution as illegal. Temporary injunction granted by the trial court was vacated on July 20, 1949, on the assurance that the company will not make payment of extra remuneration until the disposal of the suit. The trial court decreed the suit on October 31, 1950, but on appeal, the High Court by judgment dated November 25, 1955, reversed the decree and held that the resolution was validly passed. Chandulal and Co. Ltd. debited the sum of Rs. 15,000 in the profit and loss account prepared by it on June 22, 1950, for the year ended December 31, 1949. For the later year, the company showed the sum of Rs. 15,000 due under the resolution to the assessee as a contingent liability. The amounts were not paid to the assessee during the relevant years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the negative, against the assessee. The judgment is reported in CIT v. Babulal Narottamdas [1976] 105 ITR 721 (Bom). The High Court held that as there was no question of any controversy between the company on the one hand and the assessee on the other, merely because the third party raised a dispute as regards the liability of the company to pay the amount, it could not be said that the date of accrual of such income was postponed to a future date when the rights were finally adjudicated upon by a court of law and the Tribunal was not right in holding that the sum of Rs. 58,125 accrued only in November, 1955, when the High Court's judgment was Pronounced. The judgment of the High Court is challenged in this appeal. Shri Prashant Goswa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. In view of the resolution passed in the annual general meeting of the company, income of Rs. 15,000 accrued to Narottamdas in each year. This income was actually earned by him during the relevant previous years. The right to receive the extra remuneration flowed from the resolution. The income accrued or arose at the end of each accounting year irrespective of the fact whether the amount was actually paid by the company to Narottamdas or not. Though the payment was deferred; on account of the pending litigation, it cannot be said that accrual of income was postponed simply because a suit was filed by the shareholders challenging the validity of the resolution passed by the company. Income can be held to accrue when the assessee acquires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no dispute between the company and the assessee regarding the payment of such extra remuneration. Since the resolution created the right in favour of the assessee to receive the extra remuneration at the agreed rate, the assessee acquired the right to receive that income by virtue of the resolution and not by virtue of the judgment which held the resolution to be valid. There is, therefore, no force in the contention that, until the suit was finally decided by the High Court, no right is said to have accrued to the assessee. In CIT v. Hindusthan Housing and Land Development Trust Ltd. [1977] 108 ITR 380 (Cal), relied on by Shri Goswami, enhanced compensation fixed by the order of the arbitrator was withdrawn by the assessee after f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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