Accrual of waived advance income turns on when creditor's waiver became binding, not when the debt existed.

The Karnataka High Court considered whether a waived advance became taxable income in the previous year ending 31 March 1966. It held that the waiver was not firmly committed by the creditor until 16 April 1966, so the amount accrued only after the close of the accounting year 1965-66 and not in the relevant previous year for assessment year 1966-67. On that basis, the waived sum could not be assessed as the assessee's income for that year, and the answer was against the Revenue and in favour of the assessee.

---

---

Issues: Whether the waived sum of Rs. 2 lakhs could be assessed as the assessee's income for the previous year ending 31 March 1966.

Analysis: The waiver of the outstanding advance was not shown to have been firmly committed by the creditor until 16 April 1966. On the material before the Tribunal, the amount therefore accrued only after the close of the accounting year 1965-66, and not during the previous year relevant to assessment year 1966-67.

Conclusion: The sum of Rs. 2 lakhs could not be taxed as income of the assessee for the previous year ending 31 March 1966, and the answer was against the Revenue and in favour of the assessee.

---