Balancing charge taxability turns on when compensation becomes due, not the earlier takeover date, under income-tax law.

Balancing charge on acquisition of an electricity supply undertaking was taxable under section 41(2) of the Income-tax Act, 1961 in the year the compensation became due. The court treated the date of ascertainment of the compensation, not the earlier takeover date, as the decisive point for chargeability, because the amount was undetermined when the undertaking was acquired and was fixed only in the previous year relevant to assessment year 1966-67. The argument that taxability should follow the year of sale under the repealed law was rejected. The balancing charge was therefore includible in total income for assessment year 1966-67.

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Issues: Whether the balancing charge arising on acquisition of the assessee's electric supply undertaking was taxable under section 41(2) of the Income-tax Act, 1961 in the assessment year 1966-67.

Analysis: The decisive factor was when the compensation payable for the transferred assets became due. The compensation amount was not determined when the undertaking was taken over, and it was ascertained only in the previous year relevant to assessment year 1966-67. The Court held that under section 41(2) of the Income-tax Act, 1961, the balancing charge is chargeable in the year in which the money payable becomes due, not in the earlier year of taking over. The argument based on the year of sale under the repealed Act was rejected because the new provision governs the point of taxability where the amount becomes due only on ascertainment.

Conclusion: The balancing charge was rightly included in the assessee's total income for assessment year 1966-67.

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