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TMI Blog1964 (3) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned above and then convert it into rice in such a manner that the rice should conform to the standard civil supplies specification detailed in Schedules IV and V appended to this agreement and in lieu of the quantities so converted for every 100 maunds paddy procured by him, he was liable to supply 70 maunds of rice. One of the conditions of the agreement was that the procuring agent shall not dispose of the stocks of paddy and/or rice held by him on behalf of the Government, except under and in accordance with the directions of the District Collector or any officer authorised by him. He had also to arrange to export outside the State on behalf of the Government such quantities of rice and within such time and to such places as he may be directed from time to time by the District Collector or any officer authorised by him. The procuring agent will be paid for the rice so exported at the f.o.r. rate specified in Schedule I appended to this agreement. He was also under an obligation to deliver at his mill or godown such quantities of rice and within such time and to such persons as may be directed from time to time by the District Collector or any officer authorised by him, and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing in any manner whatsoever in respects of the agreements already executed by the procuring agents and in respect of all the stocks covered by those arguments. 6. On the basis of this order, a sum of ₹ 44,000 was paid to the assessee in July, 1955. In the return submitted by the assessee for the assessment year 1956-57, he included this sum of ₹ 44,000. In the light of this return, the taxable income of the assessee was determined by the Income Tax Officer. In the appeal carried by the assessee before the Appellate Assistant Commissioner no question as to whether this amount was received in the accounting year 1954-55 or 1955-56 was raised. Notwithstanding this, the Income Tax Appellate Tribunal permitted the assessee to raise this point for the first time in the further appeal brought before it. 7. After hearing the arguments of the department as also the counsel for the assessee and referring to the case-law on the subject, the Tribunal arrived at the decision that the income was properly assessed as the income includible in the assessment year 1956-57, the claim having been accepted by the Government in the accounting year as well as the payment having bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax, which runs as follows : It is clear, therefore, that income may accrue to an assessee without the actual receipt of the same. If the assessee requires a right to receive the income, the income can be said to have accrued to him, though it may be received later on its being ascertained. The basic conception is that he owed to him by somebody. There must be as is otherwise expressed debitum in praesenti solvendum in futuro.... Unless and until there is created in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right to receive the income or that income has accrued to him. 11. With great deference to the learned judges, who decided Gajapathi Naidu v. Commissioner of Income Tax, we feel that this passage, far from strengthening their view, militates against it. It is clear from the observations of the Supreme Court, as extracted here, that the income can be said to have actually accrued only when he had a right to receive a particular sum. A debt should be created in favour of the assessee and due from someone. It could not be postulated that the contractor in that case had acquired a right to receive the additional paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue v. Gardner, Mountain and D Ambrumenil Ltd. Here again, the underwriting commission was earned in a year; but under the agreement between the parties the commission was to be settled and it became payable only two years thereafter. A question arose as to the year in which the income by way of commission accrued and it was decided that the accrual was on the date of the transaction, although the payment was postponed by two years and it was only then it was quantified. There again, the right to receive the commission had arisen when it was earned. Only the ascertainment of the amount to be paid was postponed by two years. 15. The two cases could, therefore, be easily distinguished. 16. Another case adverted to is James Spencer Co. v. Commissioners of Revenue, in which the position was summed up by Lord President Cooper in these words (quoted by the learned judges) : From an examination of the numerous cases conveniently summarised in Simon on Income Tax II, 128 ff., the broad working rule which emerges as a guide to the crediting or debiting in a tax computation of subsequently maturing credits or debits is to enquire in which accounting period the right or liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they did less work they got less. It was paid to them, as the Solicitor-General says, in respect of work in 1918, including the half-year. Looking at it merely on those facts, what have I to say ? Did not that arise from the work that they did in their trade in the first half of 1918 ? If not, what did it arise from ? Could it be said that it arose from, unless it arose from the facts other than that which leads me to say that these profits arose from the business in the accounting period, and, therefore, that the decision of the Commissioner was right. As the fact which shows that the books were wrong has occurred after they have been closed, I do not see any difficulty in reopening them and putting them right. 19. If, however, these remarks are to be understood as justifying the conclusion that the payment could be said to have been received in the year in which the business was carried on and not when it was received and though he had no right to demand more than what was stipulated at the time of the contract and the increase was made subsequently, that ratio could not be applied to the Income Tax law as obtaining in India. 20. Another case relied upon by the learned j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the Government to pay the amount to the assessee which he could credit himself within the year in which the excise duty was paid and the amount could not be included in the income of the assessee for that year of account. That case is thus an authority for the proposition that it is only when there is right that could be enforced to receive payment, it could be said to have accrued or arisen. In Gajapathi Naidus case, after referring to Madalai Nadars case, the learned judges observed that it cannot be equated to a case of payment made for work done or goods supplied by the assessee. In short, it had no resemblance to a trade debt. That being so, we express our respectful dissent from the rule stated in Gajapathi Naidus case, which formed the bed-rock of the argument of the learned counsel for the assessee. 23. We might mention here that the Allahabad High Court had taken a view different from that in Gajapathi Naidus case. Referring to this decision, Kanga and Palkhivala in their Law and Practice of Income Tax (fifth edition, volume 1, page 174), commented thus : The decision to the contrary of the Madras High Court, relying on English decisions which are inapplicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges stated : 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 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 in 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 upon the meaning of the Income Tax legislation in England. But on analogous provisions, fundamental concepts and general principles unaffected by the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right he had under that contract was to receive the payments at the rates specified therein for the rice. That did not contemplated the procuring agents, that is, the assessee, selling the stocks for his own benefit and at his own risk and receiving some compensation for any loss that might be sustained by him because of driage, wastage or fall in price or other incidental matters. This is a right which accrued to the assessee only in May, 1955. This is not one of the incidents of the contract of 1954. 30. That being the position, even the Madras case, Gajapathi Naidu v. Commissioner of Income Tax, does not help him, because in the Madras case the ex gratia payment was in relation to the supplies made in the year 1949. The situation is not similar here, since this claim is not in respect of the contract of any work done or of any supplies made in 1954. Even in the Madras case, it was pointed out that in order that the claim could be said to have accrued even before the claim was accepted or payment made, it should be regarded as a trade debt. So it does not come to the rescue of the assessee, since the right to receive ₹ 2-6-0 per maund could not be said to have vested ..... X X X X Extracts X X X X X X X X Extracts X X X X
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