Accrual of income depends on an enforceable right to receive it; remuneration forgone before due date does not become taxable.

Income becomes taxable only when it accrues or arises, which requires a present enforceable right to receive it and a corresponding obligation to pay. Where remuneration is surrendered before it becomes due, no debt arises and nothing accrues; a waiver after accrual is only an application of income already earned. On the facts stated, salary was payable only at year-end, commission could arise only on completion of the year, and bonus only on declaration, and all three were forgone before the accounting year closed. The amounts therefore did not accrue or arise during that year and were not taxable.

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Issues: Whether salary, commission and bonus forgone by the assessee during the relevant accounting year had accrued or arisen as income so as to be taxable in his hands.

Analysis: The governing principle under the Income-tax Act, 1922 is that income is taxable when it accrues or arises, and accrual depends on the existence of a present enforceable right to receive the amount with a corresponding obligation to pay. If remuneration is surrendered before it becomes due, no debt comes into existence and nothing accrues; if it is given up after accrual, the act is merely an application or waiver of income already earned. On the facts found, salary was payable only at the end of the accounting year, commission could arise only on completion of the year, and bonus only on declaration. The assessee had forgone all three amounts before the close of the accounting year.

Conclusion: The amounts did not accrue or arise to the assessee during the relevant year and were not taxable in his hands.

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