Section 41(2) taxability depends on compensation becoming ascertained and due, not merely on a claim to compensation.

Section 41(2) of the Income-tax Act, 1961 applies only when the moneys payable in respect of an acquired asset become ascertained and due in the relevant previous year. Under the Karnataka Contract Carriages (Acquisition) Act, 1976, compensation for acquired vehicles had to be determined by agreement or arbitral award before it became enforceable. As the compensation was not quantified by award during the accounting year, no amount had become due in that year. Section 41(2) therefore could not be invoked for assessment year 1976-77, and the related addition was unsustainable.

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Issues: Whether the amount payable for the acquired vehicles became due during the relevant previous year so as to attract tax under section 41(2) of the Income-tax Act, 1961.

Analysis: Section 41(2) applies when the moneys payable in respect of the asset become due in the previous year. Under section 6 of the Karnataka Contract Carriages (Acquisition) Act, 1976, compensation is not merely claimable on acquisition but must be determined and quantified by agreement or award of the arbitrator, with appeal provided against the award. The expressions "payable" and "due" in section 41(2) were construed in their contextual sense to mean an amount that has become ascertained and enforceable. Since the compensation had not been determined by award during the relevant accounting year, no amount had become due in that year.

Conclusion: Section 41(2) could not be invoked for the assessment year 1976-77, and the addition made by the Appellate Assistant Commissioner was unsustainable.

Final Conclusion: The reference was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: For section 41(2) of the Income-tax Act, 1961, taxability arises only in the year in which the compensatory amount becomes ascertained and due, and not merely when the right to claim compensation accrues.

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