Taxability on transfer of undertaking depends on when consideration becomes due, not mere possession or receipt.

The excess arising on transfer of an electrical undertaking was taxable under section 41(2) only when the amount payable became due and ascertainable, not merely when possession passed to the Government or when receipt occurred. The court distinguished accrual of income from the statutory timing rule, and held that where the sale price was disputed and later fixed by compromise, the liability remained unascertained until settlement. The ordinary contractual principle that sale consideration becomes due when determined supported that reading. The amount was therefore assessable in assessment year 1963-64, and the reference was answered in favour of the Revenue.

---

---

Issues: Whether the sum arising from the transfer of the electrical undertaking was chargeable under section 41(2) of the Income-tax Act, 1961, in the assessment year 1963-64 or in the earlier year when possession was taken over by the Government.

Analysis: The provision did not turn on the date of sale alone or on the date of actual receipt, but on the point when the moneys payable became due. The Court distinguished the concepts of accrual of income and the statutory language used in section 41(2), and held that in a transaction where the price was disputed and later settled by compromise, the amount remained unascertained until the settlement fixed the liability. The ordinary contractual notion of sale under the Transfer of Property Act also supported the view that the price became due only when it was determined. On that basis, the excess over written down value was taxable only when the amount was ascertained.

Conclusion: The sum was rightly assessed in the assessment year 1963-64, and the answer to the reference was in the affirmative in favour of the Revenue.

---