Accrual of income fails where award remains disputed and stayed; withdrawal against bank guarantee does not create taxable income.

Where an award amount remains under challenge and its operation is stayed, no enforceable right to receive income arises for section 5 purposes, so the amount does not accrue as taxable income merely because it is withdrawn against a bank guarantee. The disputed principal therefore was not taxable in the relevant year on accrual basis. As the principal itself had not accrued in a real and enforceable sense, the related interest also could not be treated as having accrued and was not assessable in that year.

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Issues: Whether the amount awarded to the assessee and withdrawn against a bank guarantee constituted taxable income in the relevant year, and whether interest on that amount was also assessable on the same basis.

Analysis: The right to tax under section 5 of the Income-tax Act, 1961 depends on actual receipt as income or on accrual/arising of an enforceable right to receive income. Where the decree itself is under challenge and its operation is stayed, the assessee's right to the amount remains unsettled and contingent. Withdrawal of the money under a bank guarantee does not convert a disputed and jeopardised claim into accrued income. Since the principal amount had not accrued as income in a real and enforceable sense, the interest attributable to that amount also could not be treated as having accrued for tax purposes.

Conclusion: The disputed award amount was not taxable in the relevant year as accrued income, and the interest on that amount was also not assessable in that year.

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