Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment years 1961-62 and 1962-63 - Damages for breach of contract were awarded to assessee-HUF against Government by Trial Court - Decreetal amount realised by assessee was kept in a separate account - Interest was also credited in that account - Later, High Court reversed decree and amount became due to Government - Assessee did not dispute decreetal amount but claimed deduction of interest which had accrued on said amount during relevant assessment years - Whether, on facts, liability to effect restitution of decreetal amount arose automatically on date when Trial Court's decree was reversed by High Court - Held, yes - Whether, therefore, mere absence of entries in assessee's account books could not deprive it of its right to deduction - Held, yes - Whether, consequently, interest receipts in question were not assessable in assessee's hands - Held, yes FACTS The assessee, a Hindu undivided family, had instituted a suit against the Government claiming damages for breach of contract. The trial Court decreed the suit for Rs. 68,454. The decretal amount realised by the assessee in 195 was credited by it in its account books in a separate account called the amanat khata. The interest earned on the amount in that account was also credited in the same account. The interest income was taxed until the assessment year 1960-61. Meanwhile, against the decree the Government had preferred an appeal to High Court. On 8-4-1960, the High Court set aside the decree. Against the High Court decree the assessee appealed to the Supreme Court, which was dismissed. The assessee did not dispute the liability and offered to pay to the Government interest at the rate of 6 per cent for the period during which money remained with it. In assessment proceedings for the assessment years 1961-62 and 1962-63, the assessee claimed a deduction of Rs. 11,029 and Rs. 21,572 respectively as interest which had accrued during the relevant previous years in theamanat khata. The claim was dismissed by the Income-tax Officer who included the amounts in the total income of the assessee. The assessee appealed to the Appellate Assistant…

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