TMI Blog1993 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... evant facts of the case are that during the course of assessment proceedings, the Assessing Officer found that the assessee had not disclosed income on account of interest on debentures of Messrs. Bird and Co., and Messrs. Kumardhubi Engg. Works Ltd. although it was found that in the assessment orders for the earlier years such interest on debentures was taken on due or accrual basis. The explanation furnished by the assessee that it had lodged its claim with the prescribed authorities and as on the last date of the accounting year no decision had been taken and, therefore, interest on debentures was not taxable in the year under reference, had not been accepted by the Assessing Officer. Accordingly, he added Rs. 53,858 to the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 1982-83 adjudicated upon by the Tribunal as mentioned above and respectfully following the said appellate order, we confirm the order of the learned Commissioner of Income-tax (Appeals). " At the hearing before us, the contentions urged before the Tribunal have been reiterated. The facts are not in dispute. Messrs. Bird and Co. was nationalised in 1980 under the Bird and Co. Ltd. (Acquisition and Transfer of Undertakings and Other Properties) Act, 1980, which had come into force on October 25, 1980. In terms of section 16 of the said Act every person having any claim against Messrs. Bird and Co. Ltd. was required to prefer such claim before the Commissioner of Payments appointed under the said Act. The right of claiming interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the claims in respect of such lower category. As regards Kumardhubi Engineering Works Ltd., the company was closed down in September, 1979, due to acute financial difficulties and no interest on debentures had been received by the assessee after November 30, 1977. Subsequently, the company was taken over by the Government of Bihar on August 10, 1983, by and under the Kumardhubi Engineering Works Ltd. (Acquisition and Management) Act, 1982. The Act provided for the appointment of Commissioner of Payments before whom every person having a claim against the said company was required to file such claim and all rights including the right of interest on debentures ceased on March 7, 1982, being the appointed date in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken over the management of the company and had by notification dated May 18, 1972, declared the company to be a relief undertaking under the provisions of the West Bengal Relief Undertakings (Special Provisions) Act, 1972, and the operation of all contracts including obligations and liabilities accruing thereunder were suspended by the notification. The Income-tax Officer rejected the claim of the assessee on the ground that as the assessee was maintaining accounts on the mercantile system, the assessee could not omit to bring into account the interest on the only ground that the debt was doubtful and hence included the amount in the total income of the assessee. The Appellate Assistant Commissioner and, on further appeal, the Tribunal, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or the quantification of course, does not matter. In E. D. Sassoon and Co. Ltd.'s case [1954] 26 ITR 27 (SC), the question was when the commission for managing agency linked with annual net profits of the managed company accrues or arises. We are not directly concerned with the facts in that case, but the principle that was laid down in that case is of use. The concept of "income accruing" as a whole was considered by the Supreme Court and the substance of the long decision can be summed up in a sentence that accruing means becoming due. The observations at pages 51 and 52 of the Reports (26 ITR) would make it clear: " . . . . in order that the income can be said to have accrued to or earned by the assessee, it is not only necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in his favour, no income can accrue. It is necessary for the income to accrue that the income must be due to be paid to the assessee. In the present case, as we have seen, it is the operation of law, i.e., the provisions of the Nationalisation Act, which prevented the interest on the debenture becoming due. And the assessee has no enforceable right even though the other factors that are necessary for the production of the income are there. As would appear from the facts found by the Tribunal because of the takeover of the two debtor companies the right to receive interest on debentures ceased during the relevant previous year. Accordingly, interest on debentures did not accrue to the assessee. Even assuming that the assessee had any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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