LexTHE COMMISSIONER OF INCOME TAX, MADRAS versus A. GAJAPATHY NAIDU
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7 S.C.R. SUPREME COURT REPORTS 767 THE COMMISSIONER OF INCOME·TAX, MADRAS v. A. GAJAPATHY NAIDU (K. SUBBA RAO, J. C. SHAH AND S. M. SIKRI, JJ.] Indian Incometax Act, 1922 (11 of 1922), s. 4(1)(b)(ii)- Construction of-Analogy from English Statuaes-"Accrue" or "arise", meaning of-Income arising out of earlier :transaction- Proper year of assessment. A certain sum of money was received by the assessee as payment of compensation for the loss sustained by him in res- pect of a supply during the previous accounting year. The Income-tax Officer included the amount in the assessment year it was received. Appeals to the Appellate Assistant Commis- sioner and to the Income-tax Tribunal were unsuccessful. But on a reference, the High Court held that though in fact the right to receive the amount did not accrue during the account- ing year of the contract, it should be deemed to have related to the year of contract in respect whereof the amount was paid. On appeal by certificate, Held: (i) The decision of the High Court was deflected by its reliance on English decisions delivered under circumstances peculiar to that country and on the construction of provisions which were not in pari materia with the provisions obtaining in India. The provisions of the Indian Income-tax Act shall be construed on their own terms without drawing any analogy from English statutes whose terms may superficially appear to be similar but on a deeper scrutiny may reveal differences not only in the wording but also in the meaning a particular expres- sion has acquired in the context of the development of law in that country. Commissioner of Income-tax v. Vazir Sultan & Sons, [i959] Supp, 2 S.C.R., 375, followed;. (ii) under the definition accepted by this Court of the word "accrue" or "arise" in s. 4(1)(b)(i) of the Indian Income-- tax Act. an income accrues or arises when the assessee acquires a right to receive the same. S. D. Sassoon and Co. Ud. v. Commissioner of Income-tax, Bombay City, [1955) 1 S.C.R. 313, followed. Rogers Pyatt She!lack. & Co. v. Secretary of State for India. (1925) IL.R. 52 Cal. 1, approved. When an Income-tax Officer proceeds to include a particular income in the assessment, he should ask himself, inter alia, two queshons, namely (i) what is . the system of accountancy adopted by the assessee? and (ii) it it is mercantile system of accountancy, subject to the deemed provisions when has the right to receive that amount accrued? If he comes to the con- clusion that such a right accrued or arose to the assessee in a particular accounting year, he shali include the said income in the assessment of the succeeding assessment year. No power is conferred on the Income-tax Officer under the Act, to relate 1984 April 16 768 SUPREME_ COURT REPORTS (1964} 1964 back an income that accrued or arose in a later year to an earlier f'At~ofyear on _the ground that the said income arose out of an earlier I"""""·taz, MOllrM transaction. . v. '.d (iii) The meaning of the word "accrue" or "arise" in s. 4(1)- .A.Gajapalhy Na• u (b)(i) of the Indian Income-tax Act cannot be extended so as to - take in amounts received by the assessee in a later year, though the receipt was not on the basis of the right accrued in the earlier year. Such amounts are in law received by the assessee only in the year when they are paid. Bub/JG Rao, J. J. P. Hall & Co. v Commissioner of Inland Revenue, (1921) 12 T. C. 382 and Severns (H. M. Inspector of Taxes) v. Dada- wa!l, (1954), 35 T. C. 649, referred to. Commissioner of Income-tax. U.P. v. P. V. Kalichara.oi Jagannath, [1961] 41 I.T.R. 40, approved. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 617 of 1963. Appeal from the judgment and order, dated March 15, 1960, of the Madras High Court in Case referred No. 87 of 1955. Gopal Singh and R.N. Sachthey, for the appellant. K. Rajinder Chaudhuri and K.R. Chaudhuri, for the res- pondent. April 16, 1964. The Judgment of the Court was deliver- ed by SuBBA RAo, J.-This appeal by certificate is preferred against the order of the High Court of Judicature at Madras holding that a sum of Rs. 12,447 /- received by the respondent from the Government during the accounting year 1950-51 was not assessable to tax for the asses;:ment year 1951-52. Gajapathy Naidu, the respondent, was supplying provi- sions to the Government Stanley Hospital, Royapuram, Madras. During the financial year April 1, 1948 to Marc
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