Accrual of income principle bars tax on a non-accrued claim; later accounting treatment did not create a referable question of law.

A claim made without legal entitlement did not become taxable income merely because bills were submitted and later retrenched. The Tribunal treated the amount as neither arising nor accruing in the relevant year, so it was not includible in assessable income. The High Court agreed that later accounting treatment in a subsequent year did not convert a non-accrued amount into income, and therefore no referable question of law arose. The application for reference was rejected.

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Issues: Whether a referable question of law arose from the Tribunal's view that the sum of Rs. 19,802 was not taxable income because it had not accrued, notwithstanding the Department's reliance on its treatment in a subsequent assessment year.

Analysis: The Tribunal held that a claim made without legal entitlement could not become income merely because bills were submitted and later retrenched. The amount was treated as not having arisen or accrued during the relevant year, and therefore not includible in assessable income. The Court agreed that this did not raise a question of law, observing that an amount which never became income could not be taxed merely because of later accounting treatment in another year.

Conclusion: No question of law arose for reference, and the application was rejected.

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