Accrual of income depends on an enforceable right to receive it; disputed claims are not taxable before rights crystallise.

A firm may be assessed as a separate taxable entity even if some partners were earlier assessed on their shares, so prior partner assessments do not by themselves bar proceedings against the firm. However, profits are taxable only when an enforceable right to receive them has accrued; a disputed or contingent claim does not amount to accrued income. On that basis, the disputed profits were held not assessable in assessment year 1947-48, because the firm's entitlement emerged only through later litigation and consent terms.

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Issues: (i) Whether the assessment on the firm was valid in law notwithstanding the earlier assessment of the partners. (ii) Whether the profits in dispute were assessable in the assessment year 1947-48.

Issue (i): Whether the assessment on the firm was valid in law notwithstanding the earlier assessment of the partners.

Analysis: The firm was treated as a separate taxable entity under the Indian Income-tax Act, and the earlier assessment of some partners on their shares did not by itself prevent the department from proceeding against the firm. The court followed the binding authority on reassessment and firm liability and answered the first question without independent controversy.

Conclusion: The assessment on the firm was valid in law, and this issue was answered against the assessee.

Issue (ii): Whether the profits in dispute were assessable in the assessment year 1947-48.

Analysis: The profit arose from a transaction that, at the time it occurred, stood in the name of one partner, and the firm's claim to that profit was only asserted later in litigation. Income can be said to accrue only when a right to receive it comes into existence and the claim is no longer in jeopardy; a mere claim to profit does not amount to accrual. Since the firm's right to the profit was established only through the later suit proceedings and consent terms, the profit could not be treated as having accrued in 1947-48.

Conclusion: The profits were not assessable in the assessment year 1947-48, and this issue was answered in favour of the assessee.

Final Conclusion: The reference was answered partly for the department and substantially for the assessee, with the disputed profits held outside assessment year 1947-48 and costs awarded to the assessee.

Ratio Decidendi: Income accrues only when the assessee acquires an enforceable right to receive it; a disputed or contingent claim does not constitute accrued income for tax purposes.

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