IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S) 4091 OF 2016 (Arising out of SLP (Civil)No(s)6384 of 2009) M/S P.G.& W.SAWOO PVT.LTD.& ANR. ...APPELLANT(S) VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ORS. ...RESPONDENT(S) ORDER 1. Leave granted. 2. Heard learned counsels for parties and perused relevant material. 3. short question that arises for determination in this appeal is validity of notice issued under Section 148 of Income Tax Act (for short, 'the Act') seeking to reopen concluded assessment of appellant-assessee for assessment year 1989-1990 (for period of 21 months Signature Not Verified Digitally signed by USHA RANI BHARDWAJ commencing on 01.07.198 and ending on Date: 2016.04.26 17:16:08 IST Reason: 31.03.1989). 2 4. income in question being income from house property is liable to be computed in accordance with provision of Sections 22 and 23 of Act. premises belonging to appellant was let out on rent to Government of India. rent was enhanced from Rs.4.00 to Rs.8.11 per sq.ft. per month effective from 01.09.1987. said enhancement of rent was made by letter dated 29.03.1994 of Estate Manager of Government of India. said letter makes it clear that enhancement was subject to conditions including execution of fresh lease agreement and communication of acceptance of conditions incorporated therein. Such acceptance was communicated by appellant by letter dated 30.03.1994. 5. contention of assessee before us is that having regard to provisions of Section 5, 22 and 23 of Act and decision of this Court in 'E.D. Sassoon & 3 Company Ltd. And Others vs. Commissioner of Income-Tax', (1954) 26 ITR 27, no income accrued or arose and no annual value which is taxable under Sections 22 and 23 of Act was received or receivable by assessee at any point of time during previous year corresponding to assessment year 1989-1990. Hence, impugned notice seeking to reopen assessment in question is without jurisdiction or authority of law. 6. To controvert aforesaid contention on behalf of appellant-assessee respondent-Revenue contends before us that enhancement of rent is retrospective i.e. from 01.09.1987 and, therefore, income must have to be understood to have been received in said assessment year i.e. 1989-1990. 7. issue is capable of resolution within short compass. reading of decision of 4 this Court in E.D. Sassoon (supra) would go to show that income to be chargeable to tax must accrue or arise at any point of time during previous year. This Court in E.D. Sassoon (supra) has held in categorical terms that income can be said to have accrued or arisen only when right to receive amount in question is vested in appellant-assessee. following extract from judgment in E.D. Sassoon (supra) amply illustrates above position : word "earned" has not been used in Section 4 of Income-tax Act. section talks of "income, profits and gains" from whatever source derived which (a) are received by or on behalf of assessee, or (b) accrue or arise to assessee in taxable territories during chargeable accounting period. Neither word "income" nor words "is received", "accrues" and "arises" have been defined in Act. Privy Council in Commissioner of Income-tax, Bengal v. Shaw Wallace & Co.1 attempted definition of term income in words following :- 1 (1932) I.L.R. 59 Cal. 1343 at 1352 5 "Income, their Lordships think, in Indian Income-tax Act, connotes periodical monetary return 'coming in' with some sort of regularity, or expected regularity from definite sources. source is not necessarily one which is expected to be continuously productive, but it must be one whose object is production of definite return, excluding anything in nature of mere windfall." Mukerji, J., has defined these terms in Rogers Pyatt Shellac & Co. v. Secretary of State for India2 "Now what is income ? term is nowhere defined in Act.....In absence of statutory definition we must take its ordinary dictionary meaning -'that which comes in as periodical produce of one's work, business, lands or investments (considered in reference to its amount and commonly expressed in terms of money); annual or periodical receipts accruing to person or corporation " (Oxford Dictionary). word clearly implies idea of receipt, actual or constructive. policy of Act is to make amount taxable when it is paid or received either actually or constructively. 'Accrues', 'arises' and 'is received' are three distinct terms. So far as receiving of income is concerned there can be no difficulty; it conveys clear and definite meaning, and I can think of no expression which makes its meaning 2 (1925) 1 I.T.C. 363 at 371 6 plainer than word 'receiving' itself. words 'accrue' and 'arise' also are not defined in Act. ordinary dictionary meanings of these words have got to be taken as meanings attaching to them. 'Accruing' is synonymous with 'arising' in sense of springing as natural growth or result. three Expressions 'accrues', 'arises' and 'is received' having been used in section, strictly speaking 'accrues' should not be taken as synonymous with 'arises' but on distinct sense of growing up by way of addition for increase or as accession or advantage; while word 'arises' means comes into existence or notice or presents itself. former connotes idea of growth or accumulation and latter of growth or accumulation with tangible shape so as to be receivable. It is difficult to say that this distinction has been throughout maintained in Act and perhaps two words seem to denote same idea or ideas very similar, and difference only lies in this that one is more appropriate than other when applied to particular cases. It is clear, however, as pointed out by Fry, L.J. in Colquhoun v. Brooks3, [this part of decision not having been affected by reversal of decision by House of Lords] that both words are used in contradistinction to word 'receive' and indicate right to receive. They represent stage anterior to point of time when income becomes receivable and connote 3 (1888) 21 Q.B.D. 52 at 59 7 character of income which is more or less inchoate. One other matter need be referred to in connection with section. What is sought to be taxed must be income and it cannot be taxed unless it has arrived at stage when it can be called 'income'." observations of Lord Justice Fry quoted above by Mukerji J. were made in Colquhoun v. Brooks4 while construing provisions of 16 and 17 Victoria Chapter 34, Section 2 , Scehedule'D'. words to be construed there were profits or gains, arising or accruing and it was observed by Lord Justice Fry at page 59:- "In first place, I would observe that tax is in respect of 'profits or gains arising or accruing.' I cannot read those words as meaning 'received by'. If enactment were limited to profits and gains 'received by' person to be charged, that limitation would apply as much to all Her Majesty's subjects as to foreigners residing in this country. result would be that no income-tax would be payable upon profits which accrued but which were not actually received, although profits might have been earned in kingdom and might have accrued in kingdom. I think, therefore, that words 'arising or accruing' are general words descriptive of right to receive profits." 4 (1888) 21 Q.B.D. 52 at 59 8 To same effect are observations of Satyanarayana Rao J. in Commissioner of Income-tax, Madras v. Anamallais Timber Trust Ltd.5, and Mukherjea J. in Commissioner of Income-tax, Bombay v. Ahmedbhai 6 Umarbhai & Co., Bombay , where this passage from judgment of Mukerji J. in Rogers Pyatt Shellac & Co. v. Secretary of State for India7, is approved and adopted. It is clear therefore that income may accrue to assesee without actual receipt of same. If assessee acquires right to receive income, income can be said to have accrued to him though it may be received later on its being ascertained. basic conception is that he must have acquired right to receive income. There must be debt owed to him by somebody. There must be as is otherwise expressed debitum in presenti, solvendum in futuro; See W. S. Try Ltd. v. Johnson (Inspector of Taxes8), and Webb v. Stenton and Others, Garnishees9. Unless and until there is created in favour of assessee debt due by somebody it cannot be said that he has acquired right to receive income or that income has accrued to him. 5 (1950) 18 I.T.R. 333 at 342 6 (1950) S.C.R. 335 at 389 : 18 I.T.R. 472 7 (1925) 1 I.T.C. 365 at 372 8 (1946) 1 All E.R. 532 at 539 9 11 Q.B.D. 518 at 522, 527 9 8. Viewed from aforesaid perspective, it is clear that no such right to receive rent accrued to assessee at any point of time during assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in year 1994. contention of Revenue that enhancement was with retrospective effect, in our considered view, does not alter situation as retrospectivity is with regard to right to receive rent with effect from anterior date. right, however, came to be vested only in year 1994. 9. In light of foregoing discussions, it has to be held that notice seeking to reopen assessment for assessment year 1989-1990 is without jurisdiction and authority of law. said notice, therefore, is liable to be interfered with and order of High Court set aside. 10 We order accordingly. Consequently, appeal is allowed. 10. Needless to say, present adjudication is confined to question of jurisdiction to issue notice under Section 148 of Act for reopening assessment for assessment year 1989-1990. No opinion on rights and liabilities of parties in respect of receipt in question with regard to any subsequent year(s) has been dealt with by us and we make it clear that same will be governed by relevant provisions of Act. ....................,J. (RANJAN GOGOI) ....................,J. (PRAFULLA C. PANT) NEW DELHI APRIL 19, 2016 11 ITEM NO.7 COURT NO.7 SECTION IIIA S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No(s). 6384/2009 (Arising out of impugned final judgment and order dated 26/09/2008 in APO No. 587/1994 in WP No. 1690/1994 passed by High Court of Calcutta) M/S P.G.& W.SAWOO P.LTD.& ANR. Petitioner(s) VERSUS ASST.COMMR.OF INCOME TAX & ORS. Respondent(s) (with office report) Date : 19/04/2016 This petition was called on for hearing today. CORAM : HON'BLE MR. JUSTICE RANJAN GOGOI HON'BLE MR. JUSTICE PRAFULLA C. PANT For Petitioner(s) Mr. S. Ganesh, Sr. Adv. Mr. Yashvardhan, Adv. Mr. S. Sukumaran, Adv. Mr. Anand Sukumar, Adv. Mr. Bhupesh Kumar Pathak, Adv. Ms. Meera Mathur,Adv. For Respondent(s) Mr. K. Radhakrishnan, Sr.Adv. Mr. D.L. Chidanand, Adv. Mr. Subhash Acharya, Adv. Ms. Anil Katiyar,Adv. Mr. B. V. Balaram Das,Adv. UPON hearing counsel Court made following O R D E R Leave granted. appeal is allowed in terms of signed order. 12 As sequel to above, all pending interlocutory applications are disposed of. (Neetu Khajuria) (Asha Soni) Sr.P.A. Court Master (Signed order is placed on file.) M/s. P.G. & W. Sawoo Pvt. Ltd. & Anr. v. Assistant Commissioner of Income-tax & Or