Tax accrual follows enforceable right to receive income; deferred payment in suspense does not delay taxation under mercantile accounting.

For tax purposes, the text explains that prior assessment on a cash basis was not supported where the books and surrounding entries showed the assessee maintained accounts in which commission and remuneration were recorded, and isolated cash drawings did not establish a cash system. It also states that managing agents' commission accrued in the relevant accounting year once the right to receive it arose under the agency arrangement, even though payment was deferred and the amount was placed in suspense. Under the mercantile system, later withholding, dispute, or postponement of payment does not prevent accrual when the income has already arisen.

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Issues: (i) Whether there was material to hold that the assessee had been assessed on cash basis in the prior years. (ii) Whether the managing agents' commission of Rs. 2,26,850-5-0 had accrued to the assessee in the relevant accounting year notwithstanding that payment was deferred and the amount was placed in suspense.

Issue (i): Whether there was material to hold that the assessee had been assessed on cash basis in the prior years.

Analysis: The books and surrounding entries showed that the assessee kept the company's books and that the commission and remuneration were entered in the company's accounts. The fact that some amounts were drawn in cash did not establish a cash system of accounting. The High Court was competent to answer the legal question whether there was material for the Tribunal's finding, and the record supported the conclusion that the assessee was not on cash basis.

Conclusion: The finding that the assessee had been assessed on cash basis in prior years was unsustainable.

Issue (ii): Whether the managing agents' commission of Rs. 2,26,850-5-0 had accrued to the assessee in the relevant accounting year notwithstanding that payment was deferred and the amount was placed in suspense.

Analysis: The commission had been earned under the managing agency arrangement, credited in the accounts, and treated as a revenue expenditure of the company. Once the right to receive the amount had arisen, later withholding of payment, pendency of dispute, or transfer to a suspense account did not prevent accrual. Under the applicable charging and computation provisions, income is brought to tax when it accrues in the relevant accounting year, and quantification after the close of the year does not postpone accrual where the right has already arisen.

Conclusion: The commission had accrued to the assessee in the accounting year and was taxable.

Final Conclusion: The assessee's claim to exclude the commission from tax failed, and the appeals were allowed with costs awarded to the Commissioner.

Ratio Decidendi: Income accrues for tax purposes when the assessee acquires an enforceable right to receive it, and subsequent deferral of payment or entry in a suspense account does not prevent taxation under the mercantile system.

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