Accrual of interest income depends on a crystallised legal right to receive it, not a pending court determination.

Interest on suit-filed loans did not accrue for income-tax purposes while the civil suit remained pending, because entitlement under section 34(1) CPC and the applicable rate were still subject to the civil court's discretion. Accrual requires a legally enforceable right to receive the income, and no such crystallised right existed until the court determined the claim. The amount was therefore not chargeable to tax for the relevant assessment year.

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Issues: Whether interest claimed on suit-filed loans accrued to the assessee for income-tax purposes before the civil court determined the rate and entitlement under section 34(1) of the Code of Civil Procedure.

Analysis: Income becomes taxable when it is received or when it accrues, and accrual requires that the income has become legally recoverable. Where the entitlement to interest depends upon the court's determination under section 34(1) of the Code of Civil Procedure, the rate and even the grant of interest after institution of the suit remain within judicial discretion. In such a situation, the assessee cannot treat the disputed amount as income accruing from year to year while the suit remains pending. The amount becomes taxable only when the civil court determines it and the legal right to receive it crystallises.

Conclusion: The interest on suit-filed loans did not accrue to the assessee until the civil court decided the matter, and the amount was not chargeable to tax for the relevant assessment year.

Ratio Decidendi: Income does not accrue for tax purposes where the right to receive it and the quantification of that right remain subject to the discretion and determination of the civil court.

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