Law: Income Tax Act, 1922

Section: 4

Section 5 of the Income-tax Act, 1961 [Corresponding to section 4 of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1951-52 - During accounting year 1948-49, assessee entered into contract with Government for supply of bread to hospital - Subsequently, assessee made representations to Government for relieving him from loss sustained in supply of bread - Government directed payment of compensation for loss sustained by assessee - Accordingly assessee received certain amount on that account during year of account 1950-51 - Assessee's case was that since he received said sum in respect of contract entered into by him with Government during accounting year 1948-49, it could not be included in his income in assessment year 1951-52 - ITO rejected said contention and included said amount in assessment of relevant assessment year - Whether an income accrues or arises when assessee acquires a right to receive same - Held, yes - Whether, therefore, amount in question was rightly assessed in assessment year 1951-52 - Held, yes FACTS During the accounting year 1948-49, the assessee entered into a contract with the Government for the supply of bread to the hospital The assessee made representations to the Government for relieving him from the loss sustained in the supply of bread to the hospital. The Government directed payment of compensation for the loss sustained by the assessee under the said contract. The assessee accordingly, received on that account certain payment during the year of account 1950-51. In the relevant assessment year the ITO included the said amount in the assessment of that year. The assessee, inter alia, contended that he received the said sum in respect of the contract that was entered into by him with the Government during the accounting year 1948-49, and, therefore, it could not be included in the assessment year 1951-52. The ITO rejected the said contention. On appeal the AAC upheld the order of the ITO. On further appeal, the Tribunal confirmed the order of the AAC. On reference, the High Court having concluded that being a receipt of an earlier year, the amount could not be included in the relevant assessment year,…

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