LAWS(PAT)-1987-5-18

JAISWAL CERAMIC INDUSTRIES Vs. COMMISSIONER OF INCOME TAX

Decided On May 11, 1987
JAISWAL CERAMIC INDUSTRIES Appellant
V/S
COMMISSIONER OF INCOME-TAX Respondents

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961. The question referred to us is as follows :

(2.) THE answer to the question will depend upon whether the claim to money can be said to be a mere claim. If it be a mere claim,, it will not be liable to be treated as income accrued to an assessee maintaining his accounts on the mercantile system. If, however, the expression "mere claim" is different from claim, the value of the goods and services supplied or rendered must be deemed to have accrued and thus added to the taxable income.

(3.) IT will be observed from the above that the mercantile system of accounting brings into credit what is due immediately it becomes legally due and before it is actually received. The matter was highlighted by Shah J. with great finesse in CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 (SC), in the following words (at pp. 129-130) :