Accrual of disputed income is a question of law where facts are settled, and a reference cannot be refused.

Where the facts are settled, the question whether disputed income has accrued or arisen is a referable question of law. An amount claimed in litigation is not treated as indisputably due merely because the assessee follows the mercantile system, and the existence of a dispute does not convert the issue into one of pure fact. The High Court was therefore not justified in refusing a reference, and the Tribunal had to state the case on the accrual question.

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Issues: Whether the High Court was right in refusing to direct a reference on the question whether the disputed sum had accrued or arisen as income in the relevant previous year.

Analysis: The assessee maintained its accounts on the mercantile basis, but the entitlement to the disputed amount remained under dispute and had not been conclusively determined. The question proposed by the Commissioner turned on a legal issue arising from the Tribunal's order, namely whether income could be said to have accrued on those facts. A claim asserted in litigation was not treated as equivalent to an amount being indisputably due, and the existence of a dispute did not convert the issue into one of pure fact. The High Court was therefore not justified in disposing of the application by effectively answering the very question that ought to have been referred.

Conclusion: The refusal to direct a reference was incorrect, and the Tribunal was required to state a case and refer the question to the High Court.

Ratio Decidendi: Where the facts are settled, the legal question whether disputed income has accrued is referable as a question of law, and a mere claim does not amount to income that has become indisputably due.

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