Commission income is assessable in the year of accrual, not receipt.

CHAKRABARTI, C.J.

1. THIS is a reference under section 66(1) of the Income-tax Act, made by the Income-tax Appellate Tribunal, of a question of law arising under section 7 of the Act. Broadly stated, the question is whether when a person employed by a company is allowed a commission under the terms of his employment, but he actually draws the commission not in the year when it is earned and is credited in the employers books but in a subsequent year, such commission is assessable as the income of the year in which it becomes due or whether such amounts as are actually drawn are assessable as the income of the years when they are drawn. The question has arisen out of the following facts.

2. THE assessee, Sri Bhuban Mohan Banerjee, is employed under G.D. Banerjee and Co. Ltd., Calcutta, as the manager of its Kanpur branch. He draws a monthly salary with free board and lodging and is also entitled to a commission of ten per cent. of the company’s net profits from the Kanpur Branch. It would appear that during one of the relevant assessment years his monthly salary was Rs. 125, but during the remaining three years it was Rs. 150. In the Bengali year ending on the April 12, 1940, relative to the assessment year 1940-41, the company credited the assessee in its books with Rs. 47,801 as commission payable to him. Similarly, in the Bengali year ending on the April 13, 1941, relative to the assessment year 1941-42, the assessee was credited with a further sum of Rs. 13,401 as commission. THE company in its own assessment for the years 1940-41 and 1941-42 claimed these amounts of commission as expenditure and was allowed a deduction. THE assessee, however, did not draw the major part of the amounts credited to him, but drew only Rs. 1,200 in the first of the two years and Rs. 4,800 in the second. He had thus a large credit balance in the books of his employer. THE next four years are blank as respects commission, because none was earned or cresited to his account. In the year ending in April, 1943, however, which was relative to the assessment year 1943-44, the assessee drew from his employer, besides his salary, a sum of Rs. 31,340 which necessarily came out of the amount of commission lying on his credit. Similarly, in the year ending on the April 13, 1944, relative to the assessment year 1944-45, he drew, besides his salary, a sum of Rs. 40,000. So much however was not lying to his credit at the time and the result of the drawal was that his account with his employer was overdrawn by Rs. 9,162, the balance of the commission credited to him in previous years and lying undrawn being only Rs. 30,838. THE next accounting year with which we are concerned is the year ending in April, 1948, relative to the assessment year 1948-49. THE opening debit balance in that accounting year was Rs. 1,523. THE assessees earnings during the year were Rs. 1,800 on account of salary and Rs. 3,169-8-0 as commission, but he drew out in all only a sum of Rs. 2,385. THE result was that the year closed with a credit balance of Rs. 1,061 in his favour. In the next accounting year, that is the year ending in April 1949, relative to the assessment year 1949-50, his earnings were Rs. 1,800 on account of salary and Rs. 620 on account of commission. He had thus available to him those two amounts as also the credit balance of Rs. 1,061; but against those amounts due to him, he drew out only a sum of Rs. 1,650, leaving a credit balance of Rs. 1,931 at the end of the year.

It was in July, 1951, that the assessee first submitted a return and he did so voluntarily. The returns he submitted were for the years 1943-44 to 1949-50. For all the years, the Income-tax Officer assessed the amount of salary as salary, but he also assessed certain further sums which he called "drawl during the year against commission already adjusted in his account." These sums were described as income from other sources. The amounts thus brought under assesment as income from other sources