Accrual of income fails where disputed hire charges have not crystallised and only damages for breach remain recoverable.

Hire charges of Rs. 28,000 for dumpers were held not to have accrued to the assessee for the assessment year 1976-77 because the amount remained under dispute and had been placed in suspense pending arbitration. The Tribunal found that the assessee had taken back possession of the dumpers and that the contractual stipulation for hire charges thereafter operated as a penal clause, so only damages for breach could arise. As the right to recover the amount had not crystallised, the sum was neither received nor taxable as accrued income, and it was excluded from total income.

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Issues: Whether the sum of Rs. 28,000 towards hire charges on dumpers had accrued to the assessee and was includible in the total income for the assessment year 1976-77.

Analysis: The assessee had credited the amount under a suspense account because a dispute regarding the hire charges was pending and had been referred to arbitration. The Tribunal found that possession of the dumpers had been taken back by the assessee and that the contractual stipulation for hire charges thereafter was in the nature of a penal clause, so that only damages for breach could arise. On the facts found, the right to recover the amount had not crystallised and the amount had neither accrued nor been received.

Conclusion: The sum of Rs. 28,000 was not includible in the assessee's total income.

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