Accrual of income under mercantile accounting turns on vested right to receive, not deferred payment or third-party litigation.

Under the mercantile system, income accrues when the assessee acquires a vested right to receive it, not when it is actually paid. A company resolution created the right to additional remuneration at the agreed rate, and the pending shareholder litigation affected only payment timing, not the existence of entitlement. The remuneration was therefore earned year by year in the relevant accounting periods, and a third-party challenge did not postpone accrual where there was no dispute between the company and the assessee. The principle stated is that deferred payment does not defer accrual if the right to receive has already arisen from a valid source.

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Issues: Whether the assessee's right to receive additional remuneration accrued in the relevant accounting years on the basis of the company's resolution, or only when the High Court later upheld the resolution.

Analysis: The assessee maintained accounts on the mercantile basis, under which income is taxed when the right to receive it accrues, not when it is actually paid. The company's resolution created the right to receive additional remuneration at the agreed rate, and the pending shareholder litigation affected only the timing of payment, not the accrual of the right. The amount was earned year by year and the dispute with third parties did not postpone accrual where there was no dispute between the company and the assessee regarding entitlement. The decision relied on the settled principle that income accrues when the assessee acquires a vested right to receive it.

Conclusion: The extra remuneration accrued in the relevant years and was not deferred until the High Court's judgment; the answer was against the assessee and in favour of the Revenue.

Ratio Decidendi: Under the mercantile system, income accrues when the assessee acquires a right to receive it, and a third-party challenge or deferred payment does not postpone accrual where the entitlement itself arises from a valid source.

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