Interim refundable receipts are not taxable income until a vested right to retain them crystallises.

An excess amount received under a court-sanctioned interim arrangement over the controlled levy price of sugar was treated as a provisional, refundable receipt rather than a crystallised trading receipt. Because the payment was subject to refund with interest, backed by bank guarantees, and dependent on the outcome of pending writ proceedings and the statutory scheme governing excess realisation, the assessee had no vested and unconditional right to retain it as income in the relevant year. Sections 4 and 5 of the Income-tax Act tax only income that has accrued or arisen, and section 145 does not change the character of the receipt itself; the amount therefore was not includible in total income for that year.

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Issues: Whether the excess amount received by the assessee under a court-sanctioned interim arrangement, over and above the controlled levy price of sugar, constituted trading receipt or income taxable in the relevant year.

Analysis: The amount received over the controlled price was not an unconditional sale price but an ad hoc sum permitted under the interim consent order pending final adjudication of the price dispute. The receipt carried conditions of refund with interest, was backed by bank guarantees, and remained subject to the result of the writ proceedings and the statutory scheme regarding excess realisation. On these facts, the assessee did not acquire a vested and complete right to retain the amount as income during the year. The receipt was, in substance, a provisional deposit and not a crystallised trading receipt. Sections 4 and 5 of the Income-tax Act, 1961 do not bring to tax a sum unless it has accrued or arisen as income, and section 145 does not alter the character of the receipt itself. The character of the amount as a contingent, refundable interim payment distinguished it from an outright sale receipt.

Conclusion: The excess amount did not accrue as taxable income in the relevant year and was not includible in the assessee's total income.

Final Conclusion: The consolidated appeals succeeded because the disputed excess realisation was treated as a provisional amount pending final determination of price and not as taxable income for the year.

Ratio Decidendi: A sum received under an interim court arrangement, subject to refund and contingent on final determination of the underlying price dispute, is not taxable as income in the year of receipt unless the recipient has acquired a vested and unconditional right to retain it as trading receipt.

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