Accrual of income on contractual entitlement: later waiver does not defeat taxability once the right to receive has arisen.

Income accrues when the contractual right to receive it arises, and a later waiver does not remove taxability of income already accrued. A monthly office allowance accrued from month to month under the remuneration agreement, so it remained taxable for the accounting year except for the last month's allowance, which was relinquished before the period ended. The managing agency commission and office allowance from another company, surrendered only after the close of the previous year, were also taxable because the right to receive them had already arisen during that year.

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Issues: (i) Whether office allowance receivable from four managed companies, but relinquished by resolution during the accounting year, formed part of the assessee's income for the assessment year 1954-55; (ii) Whether managing agency commission and office allowance from M. G. R. Iron & Steel Works Ltd., surrendered by resolution after the close of the accounting year, formed part of the assessee's income for the assessment year 1954-55.

Issue (i): Whether office allowance receivable from four managed companies, but relinquished by resolution during the accounting year, formed part of the assessee's income for the assessment year 1954-55.

Analysis: The remuneration agreement fixed the office allowance at a monthly rate, while the commission was separately dealt with and was ascertainable only at year-end. The monthly allowance accrued from month to month and did not depend on the annual computation applicable to commission. A relinquishment during the accounting year could not undo amounts already accrued, though the allowance for the last month was given up before the accounting period ended.

Conclusion: The office allowance was income of the assessee for the accounting year except for the allowance relating to the last month, which was not taxable.

Issue (ii): Whether managing agency commission and office allowance from M. G. R. Iron & Steel Works Ltd., surrendered by resolution after the close of the accounting year, formed part of the assessee's income for the assessment year 1954-55.

Analysis: The resolution surrendering the amount was passed after the relevant previous year had ended, and nothing showed that the right to the amount had not already arisen during that year. On the principles governing accrual of income, a later waiver could not prevent taxability once the income had accrued within the previous year.

Conclusion: The amount from M. G. R. Iron & Steel Works Ltd. was income of the assessee and was taxable.

Final Conclusion: The reference was answered partly in favour of the assessee and partly against it, by holding that most of the office allowance was taxable while the last month's allowance was excluded, and that the amount from M. G. R. Iron & Steel Works Ltd. remained taxable.

Ratio Decidendi: Income accrues when the right to receive it arises under the governing agreement, and a subsequent waiver or surrender does not negate taxability of income already accrued; a monthly allowance accrues periodically and is not postponed to the year-end merely because commission is computed annually.

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