Case Law Details
RELEVANT PARAGRAPH
6. On account of the above difference, the matter has been referred to me. I have heard both sides. The facts recorded in the proposed orders are not in dispute. I entirely agree that unless and until the terms and conditions of advance are known and agreed between the parties or through Government of Kerala, assessee will not acquire any right to receive interest on the advanced loan and no income would accrue by way of interest. This is well settled position. As admittedly, no terms and conditions were settled between the parties, no right accrued to the assessee. For the aforesaid proposition, reference may be made to the decision of the Hon’ble Supreme Court in the case of E.D. Sasoon and Company (1954) 26 ITR 27, wherein their Lordship of the Supreme Court has held as under:
“The basic conception is that he must have acquired a right to received the income. There must be a debt owed to him by somebody. There must be as is otherwise expressed debitum in praesenti, solvendum in futuro (emphasis supplied): see W.S. Try Ltd. v. Johnson (Inspector of Taxes) (1946) 1 All ER 532 at 529 and Webb v. Stenton and others, Garnishes (12883) 11 QBD 518 at 522, 527. Unless and until there is created in favour of the assessee a debt due by somebody, it cannot be said that he has acquired a right to receive the income or that income has accrued to him.”
The aforesaid decision has been applied by the Hon’ble Supreme Court in a large number of cases.
7. In the case of CIT vs. Govind Prasad Prabhu Nath (1988) 171 ITR 417, the Hon’ble Allahabad High Court has observed as under:
“The words income “is received’, “accrues” and “arises” have not been defined in the Income-tax Act. Mere receipt of income is not the sole test of chargeability. Receipt of income reefers to the first occasion when the recipient gets the money under his own control. According to the oxford English Dictionary, the meaning of the word “accrue” is ” to fall as a natural growth or increment; to come as an accession or advantage”. The word “arise” is defined as “to spring up, to come into existence”. The words “accrue” and “arise” do not mean actual receipt of profits or gains. Both these words are used in contra-distinction to the word “receive” and indicate a right to receive. Thus, it is manifest that if an assessee acquires a right to receive income, the income can be said to accrue to him though it may be received later on. Unless and until there is created a favour of an assessee a debt due by somebody, it cannot be said that he has acquired a right to receive the income or that income has accrued to him. A mere claim to income without an enforceable right thereto cannot be regarded as accrued income for the purpose of the income-tax Act.”
8. The Hon’ble Calcutta high Court in the case of CIT vs. Bharat Petroleum Corporation Ltd. (1993) 202 ITR 492, went to the extent of saying that a mere claim of income without any enforceable right thereto cannot be regarded as accrued income.
9. In the present case, admittedly the assessee has no enforceable right to receive interest. Therefore, question of accrual of income in this case does not arise. In the above circumstances, I agree with the view taken by the learned Accountant Member.
