Meaning of “Accrues or arises”

Case Name : Dy. Cit Vs. Parikh petro chemicals agencies (p.) Ltd. 

Citation : [2002] 81 ITD 18 (mum. – Trib.)

Court : Itat-mumbai

Section : 5

Meaning : There is a difference between the word ‘accrual’ and the word ‘earned’. A person may be stated to have ‘earned’ his income in the sense that he has contributed to its production by rendering services and the parenthood of the income can be traced to him. But in order that the income may be said to have accrued to him, an additional element is necessary in the sense that he must have created a debt in his favour. The rendering of services or the other activities indulged in should have been effected to bring into existence a right to enforce payment from a third party. Earning in the sense of rendering the services or doing something which results in income without right to enforce payment thereof, will not bring about an accrual or arisal of the income. This difference is important particularly in relation to service contracts since the person rendering the services will not be entitled in law to any remuneration till the entire services are performed and in some cases, till after a lapse of a further time after the completion of the services.