Accrual of income requires an enforceable right to receive it; mere assurance cannot defer taxation to earlier years.

Income accrues only when the assessee acquires an enforceable right to receive it and a corresponding debt arises; a mere assurance or expected reimbursement is insufficient. On these facts, a 1943 letter from the Iron and Steel Controller was treated only as an assurance and not as a binding contract creating a debt during the war years. The receipt therefore could not be related back to the years of supply merely because it arose from commercial dealings. The amount was taxable in assessment year 1957-58, when the claim was quantified and payment was made, rather than on accrual in the earlier war years.

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Issues: Whether the sum of Rs. 32,218 received by the assessee in the assessment year 1957-58 was taxable in that year, or whether it had accrued in the earlier war years when the goods were supplied.

Analysis: The receipt could not be related back to the years of supply merely because it arose out of commercial dealings. The earlier reliance on the Madras view had lost force after its overruling. The 1943 letter from the Iron and Steel Controller was only an assurance and did not amount to a binding contract creating an enforceable right or a debt in favour of the assessee during the war years. Income accrues only when the assessee acquires a right to receive it, and on the facts no such right existed until the claim was quantified and payment was made.

Conclusion: The amount was taxable in the assessment year 1957-58 and not on accrual basis in the earlier war years; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Income accrues only when the assessee acquires an enforceable right to receive it and a corresponding debt is created in its favour; a mere assurance or expected reimbursement does not create accrual.

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