Accrual of income under a revised contract depends on the enforceable right actually vested, not a superseded commission clause

Income accrued only under the modified contractual right, because the assessee's original commission entitlement was validly varied during the accounting year by supplemental agreement and accepted resolution. The enforceable right to the higher percentage commission was displaced before it vested, and the decisive event was the directors' determination of the reduced remuneration. On that basis, tax could be levied only on income actually accrued under the revised arrangement, not on hypothetical income under the superseded agreement. The disputed sum therefore did not form taxable income in the assessee's hands.

---

---

Issues: Whether the disputed sum of Rs. 1,00,000 formed part of the assessee's income and was chargeable to tax for the relevant assessment year.

Analysis: The managing agency commission originally payable under the earlier agreement was varied during the accounting year by a resolution accepted by the assessee and embodied in a supplemental agreement. By reason of that variation, the assessee's enforceable right was no longer to the original percentage commission but only to such lesser remuneration as the directors might determine. The decisive event fixing the commission happened when the directors resolved the reduced amount, and until then no vested right existed in the assessee to the higher sum. Tax can be levied only on income that had actually accrued to the assessee, not on a notional amount that would have arisen under the superseded agreement.

Conclusion: The disputed Rs. 1,00,000 did not accrue as income to the assessee and was not taxable in its hands.

Ratio Decidendi: Where an enforceable contractual variation during the accounting period reduces the assessee's entitlement before the income becomes vested, tax is chargeable only on the income actually accrued under the modified right and not on hypothetical income under the earlier contract.

---