COMMISSIONER OF INCOME-TAX, BOMBAY versus M/S. SHREE GOVERDHAN LTD. BOMBAY

Citation: [1968] 2 S.C.R. 731 · Decided: 09-01-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX, BOMBAY 
v. 
M/S. SHREE GOVERDHAN LTD. BOMBAY 
January 9, 1968. 
(J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.] 
731 
Indian Income-tax Act, ,1922, ss. 2(11) ood 23A-Accounting ,vear of 
company ending on September 30, every year-Colnpany a partner in a 
firm-Accounting periods of firm for 1951-52 A.Y. ending on November 
30, 1950 and March 31, 1951-Company's annual general meeting held 
on May 17, 1951-Company's shore of income from partnership whether 
to be Included in its income for 1951-52 A.Y. for purpose of s. 23A. 
The assessee-a public limited company, entered into a partnership 
on April 20, 1950 with another firm, and thus had 1wo sources of income, 
(i) from its own business and (2) from the shares of the partnership 
business. 
The Income-tax Officer included the shares of profit of the 
assessee from the partnership business up to November 30, 1950 and up to 
March 31, 1951 in the assessment of the assessment year 1951-52. The 
assessee objected, contending that this income accrued after the ~ccounting 
year of the assessee which ended on September 30, 1950, and at i~ general 
m<:eting held on May 17, 1951, the assessee could not be expectetl to 
declare a dividend for the assessment year 1951-52 which related to the 
accounting year ending on September 30, 1950 out of its profits that 
accrued during subsequ-ent accounting period. 
Tbe Revenue maintained' 
the assessment. which, on reference, the High Court answered in favour 
of the assessee. In appeal, this Court. 
HELD : The assessable income of the assessee included the share of 
the assessee's profits in the partnership for the purpose of app1ication of 
s. 23A of the Income-tax Act, 1922 so far as the a.Sessment year 1951-52 
was concerned. 
Under s. 2(11) of the Act an assessee may have different previous 
years in respect of different sources of income and under the scheme of 
the Act the income of the varying previous years from 
the different 
'oOurces should be lumped together to arrive at the total income of the 
assessee. The provisions of ·s. 2(11) of the Act make it clear that, except 
in cases where a previous year is determined by the Department under 
cl. (b), the ·varying previous years must all necessarily end with or within 
the financial years next preceding the assessment year. 
In the present 
case, the previous year so far as the personal business of the assessee was 
cqncerned, was the previous year ended on Septen;i.ber 30, 1950, but with 
regard to the income of the partnership the previous year was the period 
between November 30, · 1950 and March 31, 1951 when the accounts of 
the partnership were made up and closed. 
The provisions of s. 23 (I) 
must be construed in the context of s. 2(11) of the Act arid the expression 
'previous year' of the company in s. 23A(I) must be interpreted as mean-
ing two previous years where the company carries on two different busi-
nesses with different sources of income for which there are separate 
accounting periods. [736 F-737 BJ 
· 
The annual general meeting of the assessee was held on May 17, 1951 
after the close of the accounting year of the firm. It is true that the 
actual profits of the -assessee from its partnership busin~s were\ ascertained 
after the close of the accounting period i.e., March 31, 19~. -. But the 
' 
732 
SUPREME COURT REPORTS 
(1968] 2 S.C.R. 
income may accrue to an a-sscsscc wi1hout actual receipt of the same and 
if the asscssee acquires a rtght to rcc;eivc the income. the income can be 
6aid to have accrued to him though it may be rccciveJ later on on 
it~ 
being ascertained. 
The le_gal positior:i is !hat a liab_ility dcpcn~ing upon a 
contingency is not a debt 1n praesenll or 1n futuro till the contingency ~ap­
pens. 
But if it is a debt the fact that_ the a~ou~~ h~s to ~ ascertained 
does not make it any the less a debt if the ltabtllly 1s certain and what 
rem:tins is only a quantification of the amount : 
Dehirum in praesenJi, 
Solve11dum in futuro. 1737 E-H) 
Commissioner of Inland Re\·enue v. Gardner hlountain &. D' Ambru-
m~nil Ltd. 29 T.C. 69, applied. 
C!\'IL APPELLATE JuRISDICTION: 
Civil Appeal No. 17 of 
1967. 
Appeal by special leave from the judgment and order dated 
Seplembcr I 8, I 962 of the Bombay High Court in Income-tax 
Refctcnce No. 34 of I 96 I. 
C. K. Daphtary, Attorney-Grneral, T. A. Ramachandrar. and 
R. N. Sachthey, for 1he appellant. 
Radhey Lal Aggarwal, Bishambar Lal and H.

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