Real income principle excludes interim rent receipts from taxation where no enforceable right to appropriate the amount exists.

Rent collected under an interim order and deposited with the District Magistrate did not constitute real income because the assessee had no enforceable right to retain, control, or appropriate the amount. The Court applied the settled principle that income tax is chargeable only on real income, not hypothetical accrual or mere book entry treatment, so the disputed receipt was not taxable in the relevant year. It also held that no referable question of law survived under the reference provision because the issue was already settled by binding Supreme Court authority, and the request for reference therefore failed.

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Issues: Whether the disputed excess rent collected under an interim order and deposited with the District Magistrate accrued as income to the assessee during the relevant previous year, and whether any statable question of law arose warranting a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The amount in dispute was collected only because of an interim order and was required to be deposited with the District Magistrate. The assessee had no enforceable right to retain or appropriate the excess collection as income, and had no access, control, or jurisdiction over it. The governing principle is that income-tax is levied only on real income, not on hypothetical income or mere book entries. Where income has not really accrued, neither accrual nor taxable receipt can be said to exist. The Court applied the settled rule that a reference is unnecessary where the answer is already concluded by binding Supreme Court authority and no debatable question of law survives.

Conclusion: The disputed amount did not accrue as income to the assessee and was not taxable in its hands for the year in question. No referable question of law arose, so the request for a reference failed.

Final Conclusion: The application under section 256(2) was rejected because the disputed receipt was not taxable income and the issue was already concluded by settled precedent.

Ratio Decidendi: A receipt collected under an interim restraint and held without an enforceable right to appropriate it is not real income and cannot be taxed on the basis of hypothetical accrual.

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