Accrual basis for commission income: amounts already due are taxed when due, not when later withdrawn.

Commission that had actually become due was chargeable in the year of accrual, not in the year of later withdrawal, under section 7 of the Income-tax Act, 1922. The provision was construed as distinguishing between amounts due in fact and sums brought in by the statutory fiction for advances or similar payments, and it did not leave any election between accrual and receipt to either the assessee or the tax authority. Applying that construction, sums withdrawn in the assessment years 1943-44 and 1944-45 were held to relate to earlier years when they became due; the 1948-49 amount was not shown to be arrears of earlier commission, and only the part of the 1949-50 withdrawal linked to earlier earned commission remained taxable on that basis.

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Issues: Whether commission payable to an employee, though credited in earlier years but withdrawn in later years, was assessable as income of the years of actual receipt or of the years in which it became due under section 7 of the Income-tax Act, 1922.

Analysis: Section 7, as amended, was construed as dealing with different categories of salary and commission. Amounts that are in fact due fall within the first part of the provision and are chargeable in the year in which they become due, irrespective of whether they are paid in that year. The payment basis is relevant only to amounts not due in fact but brought within the section by the statutory fiction relating to advances and other payments of that kind. The provision did not confer any option on either the Income-tax Officer or the assessee to choose between accrual and receipt. On the facts, the sums drawn in the assessment years 1943-44 and 1944-45 had become due in earlier years. The amount assessed for 1948-49 did not represent arrears of earlier commission, and for 1949-50 only part of the amount withdrawn could be related to earlier earned commission.

Conclusion: Commission already due could not be assessed in the years of actual withdrawal. The question was answered against the Revenue for assessment years 1943-44 and 1944-45, did not arise for 1948-49, and was answered against the Revenue for 1949-50 to the extent it represented commission earned in earlier years.

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