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TMI Blog1960 (5) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... 24th of February, 1948. The question arose whether this sum of ₹ 72,637 could be included in the assessment of the income of the assessee for the previous year relevant to the assessment year 1946-47. The Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal concurrently held that this sum of money must be included in the assessment of the income for the assessment year 1946-47 because this sum was received by virtue of the agreement which had been entered into during the relevant previous year and the work under contract had also been carried out during the relevant previous year. The clause of the agreement, which was relied upon for arriving at this finding, reads as follows : 28. No enhancement of rates will be considered in the case of contracts concluded for periods of 3 or 6 months. In the case of annual contracts, revision of rates, i.e., increases or decreases, will be provided for, but no revision will be considered or allowed within six months of the commencement of the contract. Rates for annual contracts will be subject to review, according to the rise or fall of market rates by referees appointed by the Government Reviewing Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll that the agreement provided for was a review which could be either for the purpose of increasing or decreasing the amount payable to the assessee depending on whether the market rates had gone up or had gone down. No right to receive any additional payment as thus conferred by the terms of the agreement. The right, that the, agreement conferred, was only to receive payment at the rate prescribed therein. The further provision in the agreement was that such payment was subject to review according to the rise or fall of market rates. Until there was a review, therefore, the assessee did not become entitled to enhanced rates or any enhanced amount. It was the order of review which conferred that right to receive the enhanced amount. Until that order of review was made, the only right that had accrued to the assessee was to claim the money payable at the rate laid down in the agreement itself. It appears to us, therefore, that, in this case, the extra sum of ₹ 72,637, which is sought to be added to the income of the previous year relevant to the year 1946-47, became payable to the assessee not by virtue of any right conferred by the agreement itself but because of the order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its ordinary dictionary meaning-'that which comes in as the periodical produce of one's work, business, lands or investments (considered in reference to its amount and commonly expressed in terms of money); annual or periodical receipts accruing to a person or corporation' (Oxford Dictionary) . The word clearly implies the idea of receipt, actual or constructive. The policy of the Act is to make the amount taxable when it is paid or received either actually or constructively. 'Accrues', 'arises' and 'is received' are three distinct terms. So far as receiving of income is concerned there can be no difficulty; it conveys a clear and definite meaning, and I can think of no expression which makes its meaning plainer than the word 'receiving' itself. The words 'accrue' and 'arise' also are not denned in the Act. The ordinary dictionary meanings of these words have got to be taken as the meanings attaching to them. 'Accruing' is synonymous with 'arising' in the sense of springing as a natural growth or result. The three expressions 'accrues', 'arises' and 'is received' having been used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to receive the money at the rate laid down in the agreement itself. The rates were no doubt subject to review but it was not until the review order was passed that any right accrued to the assessee to receive additional payment. The right did not become vested in the assessee on the mere completion of the contract. It had to await creation by the review order. Putting it in the other form envisaged in the decision of the Supreme Court cited above, it cannot be said that in the previous year in question any sum was owed to the assessee by the military authorities in respect of the contract which he had to perform. Once the assessee had been paid at the rates laid down in the agreement, there was no outstanding liability of the military authorities to him and no debt remained payable to him which had to be discharged later. It was not a case where the assessee had become entitled to receive some money but he could not enforce that right because of some condition or because the sum of money had not been ascertained by that time. This was a case where the right to the money itself had not accrued to the assessee and, for holding that income had accrued to him in the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than this that the commission was to be quantified only after certain deductions had been made and not that the commission would not accrue until the profits had been ascertained. The quantification of the commission was not a condition precedent to its accrual. On these facts and circumstances, it was held that the commission accrued as income even before it was ascertained or quantified. In the case before us the assessee has not relied on the circumstance that the exact amount subsequently paid to him had not been ascertained in the relevant previous year. Reliance is placed on the other circumstance that in the relevant previous year, even the right to receive any money, whether already ascertained or yet to be computed in future, had not accrued to the assessee. Consequently, this decision of the Supreme Court also does not go at all against the view taken by us in the present case. Learned counsel for the Department has, however, drawn our attention to a number of decisions in English cases where it would prima facie appear that a contrary view was taken. It is not necessary to make a reference to all these cases as most of them are dealt with in the latest case cited be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, consequently, it should be held that income to the extent of this extra amount arose or accrued to the assessee in the relevant previous year. It appears to us that it would be dangerous for us to apply the principles laid down by Rowlatt, J., in that case to the case before us as that decision of Rowlatt, J., was given on the provisions of the Excess Profits Duty Act as applicable in Britain and not on the provisions which are contained in the Indian Income-tax Act. We may, in this connection, refer to the principle laid down by the Supreme Court in Commissioner of Income-tax v. Vazir Sultan Sons [1959] 36 ITR 175 , cautioning the courts in India when relying on decisions given in England. The Supreme Court held : While considering the case law it is necessary to bear in mind that the Indian Income-tax Act is not in pari materia with the British income-tax statutes, it is less elaborate in many ways, subject to fewer refinements and in arrangement and language it differs greatly from the provisions with which the courts in England have had to deal. Little help can therefore be gained by attempting to construe the Indian Income-tax Act in the light of decisions bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7] 29 Tax Cas. 69Explaining the case of Isaac Holden Sons Ltd. v. Commissioners of Inland Revenue [1924] 12 Tax Cas. 768, Lord Simon said that: Rowlatt, J., held that the total amount of commission must be included in arriving at the profits of the taxpayer for the year 1917-18. In other words, the taxpayer was treated as earning, by his work in that year, all the profits arising from the business of the year, even though there was no legal right to part of them until the agreement was afterwards made. The decision of Rowlatt, J., put by Lord Simon in this language, emphasises the fact that what Rowlatt, J., did decide was that the profits arose from the business of the accounting year in question and the income was treated as earned by the work of the assessee in that accounting year. The point, that was thus considered and decided, was only whether the profits had or had not arisen from business of that particular year though the profits were received subsequently as a result of enhancement of rates subsequent to that relevant accounting year. In that case, therefore, the question, when the right to receive the profits accrued, did not come up for consideration at all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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