Accrual of income requires an enforceable right to receive it; disputed interim receipts and provisional tax credits were not taxable

Taxable income accrues only when the assessee's right to receive it is determinate and enforceable in the relevant accounting year. Excess realisation on levy sugar sold under interim court orders, received against a bank guarantee while the price-fixation challenge remained pending and subject to statutory credit to the Fund, did not constitute accrued income. Likewise, a provisional sales tax set-off shown as a liability in the balance sheet, pending final assessment, was only a contingent claim and not present income. Both amounts were therefore held not taxable in the year in question.

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Issues: (i) Whether the amount of Rs. 16,86,799 realised as the difference between the controlled price and the Court-permitted price of levy sugar was income accruing or arising to the assessee in the relevant previous year; (ii) Whether the amount of Rs. 64,534 credited to the sales tax set-off account was taxable as income in the relevant previous year.

Issue (i): Whether the amount of Rs. 16,86,799 realised as the difference between the controlled price and the Court-permitted price of levy sugar was income accruing or arising to the assessee in the relevant previous year.

Analysis: The amount was received only under interim orders of the High Court and against a bank guarantee, while the writ petition challenging the price fixation remained pending. The assessee's right to retain the excess realisation was still unsettled. The Levy Sugar Price Equalisation Fund Act, 1976 also treated such excess realisations as amounts required to be credited to the Fund and prohibited payment of such excess to the producer. On these facts, the receipt was not a determinate or enforceable income in the accounting year.

Conclusion: The amount of Rs. 16,86,799 did not accrue or arise as income to the assessee in the relevant previous year and was not taxable in this year.

Issue (ii): Whether the amount of Rs. 64,534 credited to the sales tax set-off account was taxable as income in the relevant previous year.

Analysis: The amount represented only a provisional sales tax set-off claim pending final determination by the sales tax authorities. It was shown in the balance sheet as a liability and was accounted for only on finalisation of the sales tax assessment. A mere book entry or claim for refund did not create a present receipt or an enforceable right to receive the amount.

Conclusion: The amount of Rs. 64,534 was not income of the assessee for the relevant year and was not taxable.

Final Conclusion: Both additions were deleted, and the assessee's appeal succeeded in full.

Ratio Decidendi: A receipt does not accrue as taxable income unless the assessee's right to receive it is determinate and enforceable in the relevant accounting year; provisional or disputed amounts received under interim arrangements and subject to statutory obligation or final adjudication are not taxable as accrued income.

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