Accrual of compensation income cannot be postponed to a later year merely because subsequent proceedings enhance the amount.

Where compensation for an undertaking had already accrued and been substantially paid in earlier years, later enhancement through further proceedings did not shift the taxable event to assessment year 1969-70. The Tribunal rejected the revisional view that the income became chargeable only on compromise before the High Court, and held that the profit could not be treated as first accruing in the relevant year. The revisional order under section 263 was set aside, and the addition under section 41(2) was held not taxable in assessment year 1969-70.

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Issues: Whether the profit arising from the sale of the undertaking and the enhanced compensation received by the assessee were taxable in assessment year 1969-70, and whether the revisional order directing fresh assessment under section 263 was sustainable.

Analysis: The compensation for the undertaking had been fixed and substantially paid to the assessee in earlier financial years. The subsequent enhancement of compensation arose out of further proceedings, but the underlying amount had already become due to the assessee well before assessment year 1969-70. On these facts, the amount of profit could not be treated as accruing for the first time in the relevant assessment year. The revisional view that the income became chargeable only when the compromise before the High Court was reached was not accepted. The Tribunal restored the Income-tax Officer's view that the profit was not taxable in assessment year 1969-70.

Conclusion: The revisional order was set aside and the addition of Rs. 57,175 under section 41(2) of the Income-tax Act, 1961 was held not taxable in assessment year 1969-70; the issue was decided in favour of the assessee.

Ratio Decidendi: Where compensation or related profit has already accrued and become due in an earlier year, it cannot be taxed again in a later assessment year merely because subsequent proceedings enhance or finalise the amount.

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