Realisation principle: decreed but unrecovered amounts are not taxable income; ledger credit alone does not create assessable income.

An unrealised decretal claim credited in the assessee's books does not constitute taxable income because taxability depends on realisation rather than mere ledger entry; the ordinary meaning of income and prior authorities support treating decreed but unrecovered sums as non-taxable. The assessee's bookkeeping, maintained to ascertain the family's financial position, cannot be recharacterised simply because it records the decretal amount; substance and purpose of the accounts prevail over form. Both issues resolve for the assessee and the matter is to be returned to the Commissioner consistent with these principles.

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Issues: (i) Whether an unrealised decretal amount credited in the assessee's books is taxable income for the purpose of the Income-tax Act; (ii) Whether the bookkeeping system adopted by the assessee was merely for ascertaining the financial state of the family or was open to the Income-tax Officer's interpretation for assessment.

Issue (i): Whether an unrealised decretal amount appearing in the books constitutes taxable income.

Analysis: Section 4's phraseology does not define the meaning of income; Section 2(15) and Section 16 govern computation but do not indicate that an amount decreed but not received is to be treated as income. The ordinary sense of the word "income" is considered, and the realisation principle (receipt) is applied to determine taxability rather than mere appearance in the books. Previous authorities addressing decretal or unrealised amounts are considered and distinguished from the decision relied on by revenue.

Conclusion: The unrealised decretal amount is not taxable income for the purpose of income-tax; the assessment cannot validly treat the decretal amount as income solely because it is shown in the books.

Issue (ii): Whether the assessee's bookkeeping system was maintained only to ascertain the family's financial position or whether it was open to the Income-tax Officer's construction to treat entries as income.

Analysis: The bookkeeping practice is examined in context and treated as an internal account-keeping method to ascertain financial state. The presence of an entry in the ledgers does not inherently convert an unrealised decretal claim into assessable income; the purpose and substance of the accounts control over formal entries when determining tax liability.

Conclusion: The bookkeeping system was properly maintained for ascertaining the financial state of the family and is not open to the construction that would render the unrealised decretal amount taxable.

Final Conclusion: Both questions are answered in favour of the assessee; the unrealised decretal amount is not taxable and the books are to be treated as maintained for financial ascertainment, with the reference returned to the Commissioner accordingly.

Ratio Decidendi: For income-tax purposes an amount decreed but not realised is not taxable as income; taxability depends on realisation (receipt) rather than mere credit in books of account.

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