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TMI Blog1986 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... nts on the mercantile system. It appears that during the relevant accounting year, the assessee-company on August 14, 1968, entered into an agreement with M/s. India jute Co. Ltd. for purchasing 2,70,000, yards of D.W. Tarpaulin cloth of specific size, packed in specific manner, deliverable between October, 1968, to June, 1969. Messrs India jute Co. Ltd. failed to supply the aforesaid goods. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Specific Delivery Rules of East India jute Hessian Exchange Ltd. and in view of the Supreme Court decision in Megna Mills Co. Ltd. v. Ashoka Marketing Ltd., AIR 1971 SC 166, the contract was void and unenforceable and hence it cannot be said that any income had accrued. This plea was repelled by the Appellate Assistant Commissioner on the following view: " The contract was entered into throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of the Supreme Court in Megna Mills' case, AIR 1971 SC 166, is that the assessee's contract dated August 14, 1968, with M/s. India Jute Co. Ltd. was not enforceable. However, since the matter was sub judice before the High Court, they did not go into the merits of this aspect. It held that a mere claim does not give rise to accrual of income in the absence of any provision for dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to make the supply. The assessee-company treated the breach of contract as actionable and sent a bill for damages. The jute mill, however, repudiated the claim. The contract between the parties was not entered into in accordance with the prescribed form and rules of the relevant stock exchange. In these circumstances, the decision of the Supreme Court in Megna Mills' case, AIR 1971 SC 166, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it was received. In such a case, the receipt would not be on the basis of any right vesting in the assessee-company under the contract, but on the basis of its actual receipt. It would be liable to be brought to tax in the year the money was actually received. Since the right to this amount did not arise or accrue at all, it could not be held that merely because the assessee followed the mercant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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