AIR 1964 SUPREME COURT 1653 ::1964 53 ITR 114 ::1964 2 ITJ 238 ::1964 7 SCR 767 ::1964 2 SCJ 478 ::1964 2 SCWR 21

Supreme Court Of India

(From Madras : AIR 1961 Mad 14)

Hon'ble Judge(s): K. Subba Rao, J. C. Shah, S. M. Sikri , JJJ

(A) Income-Tax Act (11 of 1922) , S.4(1)(d)(i), S.10— Terms 'accrue' and 'arise' in S. 4 (1) (b) (i) - Meaning of - Income arising out of earlier transaction received in subsequent year - Assessment in respect of earlier period completed on basis of assessee's accounts kept in mercantile system - Income having accrued in subsequent year has to be included in subsequent assessment - Earlier assessment cannot be reopened for that purpose. AIR 1961 Mad 14, Reversed. The words 'accrue' and 'arise' in S. 4(1) (b) (i) are used in contradistinction to the word receive and indicate a right to receive. They represent a stage anterior to the point of time when the income becomes receivable and connote a character of the income which is more or less inchoate. An income therefore accrues or arises when the assessee acquired a right to receive the same. The meaning of the word 'accrue' or 'arise' in S. 4 (1) (b) (i) cannot be extended so as to take in amounts received by the assessee in a later year, though the receipt was not on the basis of the right accrued in the earlier year. Such amounts are in law received by the assessee only in the year when they are paid.(Para 9) When an Income-tax Officer proceeds to include a particular income in the assessment he should ask himself, inter alia two questions, namely....