Accrued income remains taxable despite a later waiver where the right to receive had already arisen during the year.

Income accrues for tax purposes when the assessee acquires a present enforceable right to receive it during the previous year, even if actual payment is later. On the mercantile basis, a post-year-end waiver does not extinguish income already accrued, unless there was a genuine bilateral modification of the commission arrangement within the accounting year itself. On the facts stated, no reliable in-year alteration of the managing agency commission was shown, so the remuneration had already accrued before the later relinquishment and remained taxable.

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Issues: Whether the sum of Rs. 29,000, being managing agency remuneration and commission that accrued during the accounting year but was subsequently waived by resolution after the close of that year, was liable to be included in the assessee's taxable income.

Analysis: Under section 4(1)(b)(i) of the Income-tax Act, 1922, income is taxable when it accrues or arises during the previous year, even if not actually received. On the mercantile system, the decisive consideration is the existence of a present enforceable right to receive income during the relevant accounting period. The material distinction drawn from the authorities was that where the reduction or relinquishment of commission is brought about by a bilateral arrangement during the accounting year, the amount may never accrue as income; but where the waiver takes place only after accrual and after the close of the year, the later relinquishment does not destroy the taxability of income already accrued. The facts did not show any reliable bilateral modification of the commission arrangement within the accounting year, and the sum had already accrued as remuneration due to the assessee before the subsequent waiver.

Conclusion: The Rs. 29,000 had accrued as income during the relevant accounting year and remained taxable notwithstanding the later waiver; the question was answered in the affirmative, against the assessee and in favour of the Revenue.

Ratio Decidendi: Income which has accrued during the relevant previous year is chargeable to tax under the Income-tax Act, 1922, and a unilateral waiver or relinquishment made after the close of that year does not prevent assessment of the accrued amount.

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