Findlay, J.C and Prideaux, A.J.C:— We have heard arguments in this reference. In our opinion the question of whether sums entered as credits on account of interest and re-entered as debits in the assessee's account books, sums not actually received or proffered to the assessee, should be treated as income, profits or gains and should be taken into account in computing income for the year to which the entries relate, is of Such importance that it is desirable that this reference should be heard by a Full Bench. The decision in Reference No. 27 of 1927 by Hallifax and Mohiuddin, A.J.Cs, A.I.R 1928 Nag. 241, is one which, in our opinion, may possibly require reconsideration. The question of when a debt becomes a bad debt. which arises in this reference, is also of importance. Both questions are likely to arise frequently. We, therefore, recommend that a Full Bench should bear this reference as a whole.

OPINION

Finkhede, A.J.C:— This is a reference under Section 68(2) of the Income-tax Act 11 of 1922). The following two points have been referred to this Court for decision by the Commissioner of Income-tax:

(1) Has not the assessee got the option of declaring debts. had when he finds after sufficient waiting that from the circumstances of the debtors he is unable to recover them? Can the Income-tax authority deprive the assessee of this option? Should not the Income-tax Officer and the Assistant Commissioner have allowed Rs. 7,431-13-9 to the assessee on the same consideration on which the remaining amount out of Rs. 17,892 claimed by him was allowed?

(2) Could the Income-tax Officer and the Assistant Commissioner treat Rs. 16,031-4-6 on account of unrealized interast and merely credited in the books to equalize the sides of the khata of the debtors, as “income” coming into the hands of this assessee for the purposes of Sections 4 and 6 of the Income-tax Act, and under ruling reported in Pandurang v. Commissioner of Income-tax(1) especially when the major portion of the amount is made recoverable under the terms of the bonds in several future years? Cannot the recoveries of this interest be taxed in future and not treated as income in the year under assessment?

2. The Commissioner of Income-tax has in stating the case, answered the first question in the negative and the second in the affirmative. The reference was originally heard by a Bench of two Judges of this Court on 10th April 1928, but as the questions raised were considered to be of such importance as to necessitate a decision by a Full Bench, the reference as a whole was set down for hearing by a Full Bench duly constituted. The points for decision concisely stated in the order of reference to the Full Bench are:

(1) When does a debt become a bad debt?

(2) Whether sums entered as credits on account of interest and re-entered as debits in the assessee's account books, sums not actually received or proffered to the assessee should be treated as income, profits or gains and should be taken into account in computing income for the year to which the entries relate?

3. A few facts which occasioned this reference under Section 66(2) of the Income-tax Act, may be stated here. The assessee submitted a return showing Rs. 74,668 as his total taxable income for the previous year for purposes of assessment of income-tax for the ensuing year 1926-1927. The Income-tax Officer after looking into the accounts assesssed him on an income of Rs. 1,16,480, but in the appeal the Assistant Commissioner of Income-tax, Nagpur, reduced the assessable income to Rs. 1,13,012. This in-eluded Rs. 86,307-11-0 under the head of business profits taxable under S. 10 of the Act. The assessee complains that in fixing the business profits at this amount the item of Rs. 7,481-13-9 out of a sum of Rs. 17,982 debited on account of bad debts was wrongly disallowed, and, the sum of Rs. 16,031-4-6 which represented unrealized interest, was wrongly treated as ‘income’ in the account year.

4. It will be seen from the Assistant Commissioner's order, dated 25th April 1927, that in all Rs. 17,982 were claimed to be debited or written off as bad debts against the income of the account year. Lists were called for showing details of dates when these amounts had become due, with a view to ascertain when they were really found to be bad. On examination of the lists it was found that Rs. 7,481-13-9 were on account of old bad debts which had become time barred long before the account year. The Assistant Commissioner overruled the contention of the assessee that it should be left to him to declare when particular debts became bad debts; and that the Income-tax Department should not go on a presumption that the amount had become time barred in previous years. According to him the right criterion to know is to see whether and when the assessee's all legal remedies to recover it failed.

5. As to the other item of Rs. 16,031-4-6, the Assistant Commissioner has observed that this amount of interest is shown in the profit and loss account, i.e, kasar khata as interest receipts although no actual recovery was made and that, as the assessee's books are on the book profit system and not on cash basis, the assessment has to be made on interest accrued and due, and, it has nothing to do with what the assessee actually recovered. He opines that there can be no unfairness in this kind of assessment, because when bad debts are claimed interest is already included in them.

6. In stating the case the Commissioner has pointed out that this sum of Rs. 16,031-4-6 represented the interest which was debited to the accounts of seven debtors whose bonds had been renewed during the year with corresponding credit to the kasar khata. These bonds are said to provide that the debts were payable by instalments in several future years.

7. Taking the point of bad debts first, I may refer to page 98, Part 3, Vol. 1, Income-tax Manual, Edn. 2, where in sub-para. (3), para. 35, notes and instructions regarding the method of accounting for purposes of assessing income, profits and gains under Ss. 10 to 13 are set forth. It is pointed out there that “under the mercantile accountancy system… an entry is made on the receipt side when a sale is concluded, although the money on account of such a sale has not been paid and in making up the accounts at the end of the year such entries are treated as receipts, and the tax is levied on these ‘book profits’. It may happen that some of these ‘book profits’ cannot be recovered they are written off as “bad debts” when found to be irrecoverable and since such ‘book profits’ have been in eluded in the income assessed to income-tax the ‘bad debts’ must be written off against the ‘book profits’ in the year in which they are written off in the accounts as irrecoverable. Where the cash system is adopted, there can be no ‘bad debts’.”

8. I have underlined (italicized) the important words.

9. On the statement of the Assistant Commissioner and the Commissioner that the assessee maintains his books on mercantile-system of accountancy, the assessment of the business profits under Section 10 of the Income-tax Act, made by the Assistant Commissioner on Rs. 86,307-11-0 must be on what are treated as ‘book profits’ of the account year. It is, therefore, argued by the assessee's counsel that if the tax is to be levied on ‘book profits’ he is entitled to write off against them, such book profits to the extent of Rs. 7,481-13-9 as have been found, or adjudged by him, to be bad debts, and, as such, irrecoverable in the account year. Even according to the aforesaid instructions where “‘book profits’ have been included in the income assessed to income-tax, the ‘bad debts’ must be written off against the ‘book profits’ in; the year in which they are written off in the accounts as irrecoverable.”

10. I think that this line of reasoning based upon the instructions themselves ought to be assumed as correct. It entitles the assessee to urge that in deducing the taxable income in the shape of book profits of the account year the whole of the amount of bad debts written off by him in his account as irrecoverable in the account year must be deducted. The receipt side of the account represents the aggregate of receipts not merely on account of the year's new business but also those on account of the accumulated balances of business carried over from past years' accounts and, therefore, the debits against it must necessarily comprise the balance of outstanding actually carried over to the next year's books of accounts, and also the aggregate of such balances of the past years' businesses as have either turned out to be bad or irrecoverable in that year, or, were considered by the creditor, for several reasons, to be unfit to be carried over any further.

11. It is common knowledge that no creditor, ordinarily, likes to write off a debt and, thereby create evidence, in his account books, of its having been treated by him as a bad and irrecoverable debt, unless he has lost all hope of its recovery, whether he has lost his limitation for a suit in respect of it or not Amongst Hindu debtors a notion prevails that it is a sin to the indebted to others, and several instances of debtors executing bonds, and pro-notes, and even alienating joint properties for the satisfaction of even time barred debts are often noticeable in Courts. A creditor, therefore, naturally hesitates voluntarily to enter as given up a debt, which by change of circumstances, his debtor or even his legal representative may arrange, or, be expected, to pay even after the expiry of limitation. An entry in the creditor's account-books writing off a debt as a bad debt in any particular year is under such circumstances likely to be interpreted by the debtor as prima facie good evidence of conduct on the part of the creditor wherefrom an abandonment of his right to demand it might reasonably be inferred so as to serve as a good answer to any future demand, on the occasion of any adjustment or fresh loan. Such an entry is, in my opinion, a conscious act on the creditor's part whereby he determines his election, once and for ever, to treat the debt referred to therein as bad or irrecoverable. It, therefore, stands to reason that the creditor must I have full discretion in the matter; because, it is he, and not the Income-tax Officer who knows or must be deemed to know, the circumstances and risks as well as chances of recovery from his debtor. The Income-tax Officer cannot, therefore, legally insist that the assessee must subordinate his own will or discretion and even his decision in the matter to his decision. The creditor, merely because he happens to been assessee liable to pay income-tax to the Crown, cannot be asked completely to surrender his own judgment and allow it to be overridden by that of the Income-tax Officer.

12. In the absence of any legislation to that effect an Income-tax Officer cannot, in my opinion, dictate to the assessee that he must write off a certain amount due to him after the lapse of the prescribed period of limitation. Nor can he lay down that in a given set of circumstances the assessee will show the amount as outstanding, at his own risk, since it will no longer give him any right to set it off as a bad debt against his profits. The Hindu law does not recognize any rule as to the extinction of claims by efflux of time: Ram Kishan Rai v. Chhedi Rai(2). The older the debt the greater the responsibility of the descendants of the man who leaves the debt unpaid. Vrihaspati accordingly lays down:

“The father's debt must be first paid, and next the debt contracted by the man himself, but the debt of the paternal grandfather must even be paid before either of these: Kanhaiya Lal, J., in the Full Bench case of Gajadhar…Defendant v. Jagannath…Plaintiff .(3) observed at pp. 782-83 (of 46 All.),”

“The Hindu law did not recognize any rule of limitation for the recovery of debts. A debt may become irrecoverable under the law now in force by reason of the lapse of the period of limitation, but the debt exists all the same, and if a person chooses to pay a time barred debt in the manner permitted by Section 25 of the Contract Act, the debt which he chooses to pay remains the same debt, though by reason of the contract which he enters into, it assumes a new garb and gains a fresh vitality.”

13. Mere loss of limitation for a suit cannot, therefore, be regarded as a criterion of universal application in the matter of writing-off debt.

14. Sometimes it may happen that when a loan is taken by a debtor he may be quite solvent and the creditor may entertain no doubt as to his ability to pay. In the next year of the advance, and, perhaps, several years before the due date, he may become involved in a financial crisis, for which he is not responsible, as a result of the bank or firm, with which he may have been crediting his surplus money, failing. There may thus be no prospect in that year, or in the near future, of any recovery from such a debtor. If as argued on behalf of the Crown, this creditor were to make it his practice to debit as bad or irrecoverable debt, every loan or its balance on the expiry of three years from its due date, and not earlier, how and when is he to debit the amount of the debt to the kasar khata, although he is quite satisfied as to the debtor's inability to liquidate it. Is he to wait until the whole debt falls due, and also for a period of three years thereafter, to become entitled to debit the said debt as a bad debt for purposes of income-tax? Or, should he debit it in the year in which the debtor's liability to pay becomes clear to his mind? The Income-tax Department might in the latter case come down on him for having departed from his system of book-keeping and may there-fore disallow that debit. It is no use multiplying instances to expose the absurdity of the contention. Several anomalous results will follow, if the assessee's discretion or election in the matter of the choice of the proper time to write off a debt advanced by him as a bad or irrecoverable debt were allowed to be overridden by the taxing officer's decision in this way.

15. The assessee must for obvious reasons be the sole arbiter of his own rights and privileges as regards the business he conducts in his own interest. What is to his interest, and what is prejudicial to him, must depend upon his own decision. It, therefore, follows that, on the question whether to treat any particular debt as bad or irrecoverable, his word or decision must be final for he alone is or can be the judge of the risks, chances and circumstances which may affect the recovery or non-recovery of that debt from his debtor.

16. There is nothing in the wording of Section 24 of the Income-tax Act of 1922 which militates against this view. That section does not authorise the Income-tax Officer to investigate and determine the year in which any loss sustained is to be deducted from profits. All that it enacts is that the loss sustained in any year under any of the heads mentioned in taxing sections shall be set off against his income, profits or gains under any other head in that year, so that loss under one head of income can be charged against profits under another in the same year. A reference to Lord Halsbury's Laws of England, Vol. 16, para. 1310, dealing with the subject of income-tax, shows that in England no deduction is allowable

“for any debts except bad debts proved to be such to the satisfaction of the Commissioners.”

17. I do not find such a prohibition either in S. 10 or S. 24 or anywhere else in the Indian Income-tax Act of 1922. In the absence of words “proved to be such to the satisfaction of the Commissioner” or words to that effect, in the Indian Statute, I am inclined to take the view that bad debts are deductible from business profits at the opinion of the assessee, the deduction need not be of only such as are proved to the satisfaction of the Income-tax authorities to be bad debts. 1 do not find any restriction in the Indian Statute as to the year in which the bad debts could be deducted by the assessee. In the absence of words in the statute restricting the assessee's option, and, prescribing, the time for writing them off, or, the quantum of proof required, as a condition precedent, for doing so, or imposing the condition that the Income-tax authority should be consulted before writing them off, I think the assessee's right to debit, the loss sustained on account of bad debts written off by him, against the profit's or gains of any year must be held to be unqualified and absolute, as regards the amount to be debited and the choice of time at which to write it off. His decision to write bad debts off the account cannot be regarded as conditional upon his proving them to be bad debts to the satisfaction of the Income-tax authorities, as is the case under English Statute.

18. In the absence of any express provision in the Income-tax Act, 1922, either authorising or prohibiting the deduction of bad debts from the profits of a business carried on by an assessee, and in view of the fact that the specific directions in S. 10 of the Act are subsidiary to the underlying principle that only profits ascertained according to the mercantile system of accounting, are taxable, there, can be no two opinions that bad debts actually written off the account as such by a creditor would form a proper deduction. What is usually done is to square up the debtor's personal ledger account by entering a corresponding credit to wipe out, wholly or partially, as the case may be, the debit standing against his name. Thus, once these personal ledgers of the debtors are squared up, or the balance due reduced by the amount written off, the sums written off can no longer be carried over to the next year's books as outstanding assets of the business. These aggregate sums written off, must, therefore, necessarily go to reduce the receipts of the business profits in the year in which they are written off and thus reduce the balance of outstandings to be carried over to the next year. It, therefore, follows that, unless and until the bad debts are written off the account no right to claim a deduction on their account, even though they may have been ascertained in the past years, accrues to the assessee. If the assessse has, failed to sort out in the past the bad debts from the good or doubtful debts and indiscriminately carried over the whole of the outstandings to the next year's account, it does not stand to reason that he should be compelled for ever, at least for purposes of income-tax assessment, either to treat what are admittedly bad debts of some standing as good debts because of his omission to sort them at such time as the income-tax authorities may think, was the proper time for that purpose, or to take the risk of being called upon to pay tax on business profits by ignoring bad debts altogether. For these reasons I am of opinion that the item of Rs. 7,481-13-9 was wrongly disallowed in computing income under the head of “business profits.”

19. I now proceed to consider the second point referred. As pointed out by the Bench of this Court in Pandurang v. Commissioner of Income-tax the word income has nowhere been defined in the Income-tax Act of 1922. The learned Judges of the said Bench referred to the Privy Council decision in St. Lucia Usines and Estates Co. v. St. Lucia(4) and in particular to Lord Wrenbury's following observations as regards the true meaning of the word “income” as used in the taxing statute which was involved in that case, and the provisions whereof are more or less analogous to those of the Indian Statute in this respect:

“The words “income arising or accruing” are not equivalent to the words “debts arising or acoruing.” To give them that meaning is to ignore the word “income.” The words mean ‘money arising or accruing by way of income.” There must be a coming in to satisfy the word “income.” This a sense which is assisted or confirmed by the word “received” in the proviso at the end of S. 4, sub-S. 1. If the taxpayer be the holder of stook of a foreign Government carrying say 5 per cent interest and the Government is that of a defaulting State which does not pay the interest, the taxpayer has neither received nor has there accrued to him any income in respect of that stook a debt has accrued to him but income has not. It does not follow that income is confined to that which the taxpayer actually receives. Where income-tax is deducted at the source the taxpayer never receives the sum deducted but it accrues to him. It is said, and truly, that a commercial company, in preparing its balance sheet and profit and loss account, does not confine itself to its actual receipts, does not prepare a mere cash account but values its book debts and its stock in trade and so on and calculates its profits accordingly. From the practice of commerce and of accountants and from the necessity of the case this is so, but is far from establishing that income arises or accrues from (as above instanced) an in vestment which fails to pay the interest due.”

20. I have underlined (italicized) the words which seem to me to be important for the purposes of this reference.

21. In the aforesaid case their Lordships of the Privy Council had to interpret the words “accruing or arising” as also the words “derived” or “received” as used in, relation of the words “income, profits or gains” in an Income-tax Ordinance. 1910, of St. Lucia where also income-tax was leviable on an assessment made on the basis of a return of the assessee's income; for the previous year, as is the case under the Indian Income-tax Act. Their Lordships held that the appellant company had not derived or received any “income” in the account year, as the purchaser from that company had not paid the interest payable in that year on the unpaid part of the purchase price which became due then. They thus distinguished “income” from “debt” for the purposes of assessment and held that the word “income” is not equivalent to the word “debt” and unless “money arising or accruing by way of income” actually ‘comes in” there is no “income” in the strict sense of the term.

22. In Gresham Life Assurance Society v. Bishop(5) Lord Lindley has observed that a sum of money may be received in more ways than one, e.g, by the transfer of a coin or a negotiable instrument or other document which represents or produces a coin and is treated as such by the business men. Even a settlement of account may be equivalent to a receipt of a sum of money although no money were passed. His Lordship further observed that to constitute a receipt of anything there must be a person to receive and a person from whom he receives, and something which is received by the former from the latter must be a sum of money and that

“a mere entry in an account which does not represent such a transaction does not prove any receipt, whatever else it may be worth.”

23. If the principles underlying the two Privy-Council cases quoted above for determining what is “income” were applied to the facts and circumstances of this case, I think that the arrears of rent which were calculated and went to form, the consideration of the several renewed bonds then accepted, having been allowed to remain unpaid and locked up again in the hands of the debtors for a further period stipulated in each bond, could not be treated as “income derived accruing, arising or received” at the time. To become “income” of that year it had then to “come in,” which admittedly it had not. A mere entry in the account, therefore, under the kasar khata, with a view to equalize or square up the old debit of the amount outstanding against the debtor and also to make fresh entries in the debtor's personal ledger account only to tally them with the terms of the contracts concluded in the shape of renewed bonds does not and cannot, in my opinion, entitle the debtor to say that the said amount or the interest included therein was paid by him to the creditor on the date the bonds were renewed. Since the amount of prospective sawai debited to the debtor's personal ledger account cannot be regarded as an outgoing sum of money advanced to him actually on the date he executed a bond for a consolidated sum a mere credit of that sawai in the kasar khata cannot be treated as “income” under that date. Similarly, arrears of interest included in the consideration of the renewed bonds and debited to the debtor's personal ledger account with a corresponding credit thereof to the kasar khata imports no “outgoing” or “coming in” of any sum of money.

24. Moreover, the sawai as well as the interest though credited the same day in the kasar khata was admittedly in the future under the terms of the renewed bonds. Cousequently, so long as the amount of sawai or interest so included an the consideration does not become overdue to the creditor, he cannot be regarded as having even realized it, as it were, for purposes of income-tax assessment simply because he credits it in the kasar khata. If the terms of the contract disentitle the creditor from demanding the interest until after the lapse of a certain period of time, and if when interest becomes due, the creditor may not succeed in realizing it, I think it would not be just and equitable to treat the unrealized interest, although formally credited to the kasar khata, as income, profits or gains derived accruing or arising or received, for purposes of the Ineome-tax Act.

25. The mere conclusion of a contract is not always sufficient to yield a business profit. It is the performance of its terms that leads to the accrual of a claim to, or to the receipt of, profits of the business. If on the occasion of taking the renewal bond the creditor expressly agrees to give time to the debtor to pay up the arrears of interest at a future date, he by his own contract precludes himself from demanding or realizing it at once, even within a reasonable time usually necessary to cash a cheque on a banker. In other words, the test to be applied is, whether any profits in the shape of interest had become due to the creditor in such a manner as to be immediately available to him in the account year so as to be capable of being received by him at his choice and pleasure. If the interest-money has become due to the assessee in the manner and in the sense that it was so completely under his control that, he by an act of his will, could receive it in cash without greater trouble than is involved in cashing a cheque, then only it could be called “income” such as would be liable to payment of tax, otherwise not; cf. Sadasiva Ayyar, J's observations in Secy. to the Board of Revenue Income-tax, Madras v. Arunachalam Chettiar(6). Although this Madras case was under the Act of 1918 and the present is a case under S. 13 of the Act of 1922, it does not make any difference in the principle applicable. Simply because, while under S. 5 of the Act, 1918, only “income” was made chargeable to income-tax, and under S. 6 of the Act of 1922, not only “income” but profits” and gains” are made chargeable, the addition of the words “profits” and “gains” makes no difference as regards the matter now under consideration as I will show in the following paragraphs.

26. In Tora Gul Bai v. Commissioner of Income-tax(7), the sale-proceeds of goods sold in England by the Amir of Bukhara through a commission agent were credited to the agent's banking account in London and then transferred to his order at Bombay. There was no definite agreement fixing the rate of commission payable to the agent. The dispute as to the commission was settled in a suit at Peshawar in accordance with a compromise executed at Kabul and the Peshawar Court decreed that two lacs of the sale price was the property of the agent. The agent was assessed to income-tax on that sum. On the question being referred to the High Court at Lahore as to whether the Peshawar Court's decree resulted in the receipt by the assessee of the two lacs in British India for purposes of Section 4(1) of the Income-tax Act of 1922, it was held that as the assessee had received the price for the goods in England not as owner but merely as agent, notwithstanding his right to detain a portion of the money as his remuneration, he was not competent to convert the same to his own use before he had settled with the Amir, and thus, for the purposes of Indian Income-tax, the assessee received his two lacs after it had been allotted to him by virtue of the compromise.

27. In J.P Hall & Co. Ltd. v. The Commissioners of Inland Revenue(8), it was held that, for the purposes of Excess Profits Duty, profits from the contracts for the purchase and sale of the control gear arose to the appellant company in the accounting periods in which the gear was actually delivered and not in the prewar period ending the 30th June 1914, in which the contracts were made. The following observations of Lord Sterndale, M.R, are important:

“* * * These profits were neither ascertained nor made at the time that these two contracts were concluded. There are any number or contingencies that might have happened, by which the profit would not have turned out what it appeared on the face of it when the contracts were made. Any number of complications might have occurred that might have caused quite a different result to have accrued from these two contracts.”

28. Atkin, L.J, also observed that

“the profits for Excess Profits Duty are to be assessed on the same basis of profits for income-tax purposes, and the word “profits” for income-tax purposes is to be understood in accordance with the words of Lord Halsbury in the Gresham Life Assurance Society v. Styles(9) “in its natural and proper sense, in a sense which no commercial man would misunderstand”

and he says

“that profits and gains must be ascertained on ordinary principles of commercial trading.” * * * It seems to me that no person here trying to ascertain profits on the principles of ordinary commercial trading would dream of including profits in his yearly balance-sheet, which would not be made until the goods had actually been delivered in respect of some contract which was to run over a period of at least two years, possibly more. To my mind the procedure of the company was the ordinary commercial procedure in taking the profits that they made as and when the goods were delivered. Anything else, it appears to me, would be quite contrary to commercial procedure, and would not be profits in the natural and proper sense.”

29. The principles deducible from these ruling are that unless and until the preliminary conditions necessary for earning the benefit of any business contract as a profit are settled, or performed the profit does not even arise, or accrue. To treat it as a profit, in its real sense the assessee must be “competent to convert the same to his own use;” he cannot therefore, be regarded as having received any income in the shape of profits of the particular business contract until the contract is performed. Further a mere conclusion of a contract is not sufficient, nor will a receipt of money on somebody else's account be sufficient pending settlement with him. It, therefore, follows that a mere credit of the amount of interest in the kasar khata, in the year when the contract is concluded, pending the actual receipt thereof after it falls due, is not sufficient to charge the amount so credited as “income.” Not only this but a credit of the anticipated profit in the very year in which the contract is made, i.e, before the performance, or delivery, contemplated by it, falls due, or, is given, is “contrary to commercial procedure” and would not reflect the real “income” of the assessee, or “be profits in the natural and proper sense.”

30. Reading the credit entries in the kasar khata in conjunction with the debit entries in the debtor's personal ledger accounts the only legal inference deducible therefrom is that what is shown as received under the kasar khata is really not received at all but is only expected to be received or perhaps may never be received and the amount so credited can therefore be regarded merely as an unrealized asset of the business, and not as “income” or “profits” or “gains” of the business. What is only a jama kharchi kasar, i.e, profit by book adjustment cannot be confused with profit derived from cash realizations of interest, merely because both are lumped together under one ledger head kasar khata.”

31. A Bench of this Court had occasion to decide in Commissioner of Income-tax v. Nanhelal(10) a more or less similar question upon a reference by the Commissioner of Income-tax. It was there held that sums shown in the accounts as having fallen due but not received could not be treated as “income.” I think that the said decision in no way contravenes the provisions of Section 13 of the Income-tax Act of 1922. For these reasons I am of opinion that the item of Rs. 16,031-4-6 which represents unrealized interest was wrongly treated as “income,” “profits” or gains” under the head of “business” by the Assistant Commissioner of Income-tax in taxing the present assessee. As a result of the above conclusions I recommend that the answer to the first point should be in the affirmative, and that to the second should be in the negative.

Findlay, J.C:— I have had the advantage of perusing the opioion of Kinkhede, A, J.C, in this case and I fully concur therein.

Prideaux, A.J.C:— I have had the advantage of perusing the opinion of Kinkhede, A.J.C, in this case and I agree with him in his decision on both questions.

32. Reference answered.