Real income and accrual principles barred tax on alleged land sale consideration absent transfer and enforceable right to receive it.

A memorandum of understanding for a land transaction did not amount to a completed transfer because title was not conveyed, possession was not handed over, and the contractual conditions for completion were not fulfilled. The returned advance also indicated that the full consideration had not become due. Applying the real income principle, section 5(1) of the Income-tax Act, 1961, and the transfer concept in section 2(47) read with section 53A of the Transfer of Property Act, the alleged sale consideration was held not to have accrued. The amount was therefore not chargeable to tax in the assessee's hands.

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Issues: Whether the amount of Rs. 10.79 crores alleged to arise from the land transaction had accrued to the assessee so as to be taxable in the relevant assessment year.

Analysis: The document executed between the parties was treated as a memorandum of understanding and not as a completed conveyance. No title or ownership in the immovable property was transferred, the possession was not handed over, and the contractual conditions for completion were not fulfilled. The advance of Rs. 21 lakhs was returned the very next day, which negatived the inference that the full consideration had become due or had been earned. Applying the concept of real income, the principles of accrual under section 5(1) of the Income-tax Act, 1961, and the definition of transfer in section 2(47) read with section 53A of the Transfer of Property Act, 1882, the income could not be said to have accrued in the absence of an effective transfer or enforceable right to receive the consideration.

Conclusion: The alleged sale consideration did not accrue to the assessee and was not chargeable to tax in its hands.

Final Conclusion: The addition based on the alleged land transaction was unsustainable, and the assessee was entitled to relief.

Ratio Decidendi: Income is taxable only when it has actually accrued or arisen to the assessee through an enforceable right, and a mere memorandum of understanding without transfer of possession or completion of contractual obligations does not create taxable accrual.

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