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“right to receive”

Judicial DoctrinesAccrualAccrual601 judgments

The decision most relied on for right to receive is CIT v. Excel Industries Ltd. (358 ITR 295), cited in 935 judgments on BharatTax.

Leading authorities on right to receive

CIT v. Excel Industries Ltd.
358 ITR 295 · 2013 · Supreme Court
935
citing judgments

When an income or expenditure is revenue neutral across different assessment years, where any benefit derived is offset by a corresponding liability or reversal, no additional tax liability arises, particularly concerning income recognition under the mercantile system of accounting.

E.D. Sassoon & Co. Ltd. v. CIT
26 ITR 27 · 1954 · Supreme Court
256
citing judgments

Income is taxable only when it represents real income, not notional income. It accrues only when there is a vested right to receive it, typically upon the occurrence of a transfer or event, rather than merely on a time basis.

State Bank of Travancore v. CIT
158 ITR 102 · 1986 · Supreme Court
222
citing judgments

Under the mercantile system of accounting, interest income accrues and is taxable in the year it arises, even for "sticky" or doubtful loans, as the right to receive the income is paramount, not its actual receipt, provided there is an agreement for payment.

Mysore Minerals Ltd. v. CIT
239 ITR 775 · 1999 · Supreme Court
215
citing judgments

For income tax purposes, the 'owner' of a property is the person who is entitled to receive income in their own right, bears the risks incidental to ownership, and utilizes the asset, even if the sale deed is not formally registered. This beneficial ownership is sufficient for claiming depreciation or capital gains exemption under relevant sections.

CIT v. Sitaldas Tirathdas
41 ITR 367 · 1961 · Supreme Court
146
citing judgments

Income is diverted by an overriding charge, and thus not taxable, when it never truly accrues to the assessee due to a prior obligation. Conversely, income that first accrues to the assessee and is then applied to discharge an obligation out of that income is taxable.

CIT v. D.P. Sandhu & Bros.
273 ITR 1 · 2005 · Supreme Court
140
citing judgments

Surrender of tenancy rights is a transfer of a capital asset, and the consideration received is a capital receipt subject to capital gains tax. If the cost of acquisition cannot be determined, the transfer of such an asset was not taxable under capital gains prior to the amendment of Section 55(2) in 1995.

Morvi Industries Ltd. v. CIT
82 ITR 835 · 1971 · Supreme Court
136
citing judgments

Income accrues when it becomes due, vesting the assessee with the right to claim the amount, even if payment is not immediate. It requires a corresponding liability from the other party to pay, emphasizing real rather than hypothetical accrual, particularly for assessees using the mercantile system of accounting.

CIT v. Vasisth Chay Vyapar Ltd.
330 ITR 440 · 2011 · High Court
125
citing judgments

Interest income is taxable under the mercantile system of accounting even if it is not actually recovered, provided there is a right to receive it. The decision also touches upon the treatment of bad debts and provisions for doubtful debts under Section 36(1)(viia).

Judgments citing right to receive

Addl.CIT, Special Range- 9, New Delhi vs. Vlcc Health Care Ltd., New Delhi

In the result, the appeal filed by the Revenue is dismissed

ITA 4414/DEL/2017[2009-10]Status: DisposedITAT Delhi09 Oct 2024AY 2009-10

Bench: Shri S.Rifaur Rahman & Shri Sudhir Pareekaddl.Cit, Special Range 9, Vs. Vlcc Health Care Ltd., New Delhi. M – 14, Commercial Complex, Greater Kailash Part Ii, New Delhi - 110 048. (Pan : Aaacc4808P) (Appellant) (Respondent) Assessee By : Shri Vinod Kumar Bindal, Ca Ms. Rinky Sharma, Advocate Revenue By : Shri Vivek K. Upadhyay, Sr. Dr Date Of Hearing : 27.08.2024 Date Of Order : 09.10.2024 Order Per S.Rifaur Rahman,Am: 1. This Appeal Has Been Filed By The Revenue Against The Order Of Ld. Commissioner Of Income Tax (Appeals)-33, New Delhi [“Ld. Cit(A)”, For Short] Dated 08.11.2016 For The Assessment Year 2009-10. 2. Brief Facts Of The Case Are, Assessee Filed Its Return Of Income On 29.09.2009 For The Ay 2009-10 Declaring An Income Of Rs.14,34,56,042. The Case Was Processed Under Section 143(1) Of The Income-Tax Act, 1961 (For Short ‘The Act’). The Case Was Selected For Scrutiny & Notices U/S 2 143(2) & 142 (1) Along With Questionnaire Were Issued & Served On The Assessee. In Response, Ld. Ar Of The Assessee Attended From Time To Time & Filed The Relevant Information As Called For. 3. Assessee Is Engaged In The Business Of Slimming & Beauty Services. The Assessee Has Not Disclosed Any Other Source Of Income During The Year. During Assessment Proceedings, Ao Observed That The Assessee Is Carrying Substantial Credit Balances As Current Liabilities Under The Head ‘Advance From Customers’. The Assessee Was Asked To Explain Along With Supporting Documents. Assessee Vide Its Letter Dated 22.11.2011 Submitted As Under :-

For Appellant: Shri Vinod Kumar Bindal, CAFor Respondent: Shri Vivek K. Upadhyay, Sr. DR
Section 143(1)Section 2Section 29

different than 1.2 profits. In mercantile method of accounting, money receipt by itself is not taxable. It is also not material when the right to receive the payment accrued. However, what is important for appreciation is whether the said accrual of right 'to receive the payment for converted into income ... only the income based on services provided which is taxable and not the right to receive the payment for services to be performed or its receipt. The receipt becomes income when services to be given against the receipts are performed or goods are sold. Even readiness of the goods