Accrual of income depends on enforceable right to receive, and contingent contract payments are taxed only when due.

Income accrues only when the assessee acquires an enforceable right to receive it; where joint venture consideration is linked to staged contractual performance, only the amount due in the relevant year is taxable and the balance remains contingent until conditions are met. Once project income is estimated at 10% of receipts, a separate disallowance under section 40A(3) does not survive, because individual expenditure items are no longer separately adjudicated on that basis. The material also notes that section 44AD relief is unavailable where gross receipts exceed the statutory threshold.

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Issues: (i) Whether the entire consideration under the joint venture agreement accrued to the assessee in the relevant year or only the part payment actually received accrued, the balance being conditional upon performance of contractual obligations. (ii) Whether, after estimation of income at 10% of the receipts, any separate disallowance under section 40A(3) could survive and whether the assessee could claim the benefit of section 44AD.

Issue (i): Whether the entire consideration under the joint venture agreement accrued to the assessee in the relevant year or only the part payment actually received accrued, the balance being conditional upon performance of contractual obligations.

Analysis: The agreement required the assessee to perform several obligations over time, including obtaining permissions, procuring consents, and carrying out ground-level redevelopment activities. The consideration was payable in stages, linked to the assessee's performance and fulfilment of contractual conditions. The subsequent receipts were also spread over later years and were offered to tax in those years. In such a situation, only the amount that had become due in the relevant year could be said to have accrued, and the balance was merely contingent and not an enforceable right to receive in that year.

Conclusion: The entire consideration did not accrue in the relevant year. Only the part payment actually received in that year was taxable, and the balance could not be brought to tax on an accrual basis.

Issue (ii): Whether, after estimation of income at 10% of the receipts, any separate disallowance under section 40A(3) could survive and whether the assessee could claim the benefit of section 44AD.

Analysis: Once the income from the project was determined on an estimated basis, the separate treatment of individual expenditure items for the purpose of disallowance under section 40A(3) did not survive. The claim under section 44AD was also unavailable because the gross receipts exceeded the statutory threshold for eligibility.

Conclusion: No separate disallowance under section 40A(3) survived after estimation of income, and the assessee was not eligible for section 44AD treatment.

Final Conclusion: The addition was restricted to the estimated income applied to the receipts actually accrued in the year, and the Revenue's challenge to the relief granted by the appellate authority failed.

Ratio Decidendi: Income accrues only when the assessee acquires a legally enforceable right to receive it, and where contractual consideration is contingent upon future performance, only the amount presently due can be taxed on accrual.

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