BENNET, J. - This is a reference by the Income Tax Commissioner at the instance of an assessee, a Hindu undivided family. The two questions referred are :-
(1) Whether the unrealised decree of Rs. 23,269 against Talatuf Husain and others entered in the interest Khata is taxable income for the purpose of income tax, while in fact the amount has not been received at all, and whether the assessment of the applicants is correct under the law and (2) whether the system of keeping the account adopted by the assessee is simply for the purpose of ascertaining the financial state of the family in a particular year or is open to the interpretation put by the Income Tax Officer ?
The assessment was made according to the income tax authorities on the books of the assessee, and it is claimed that the amount of a decree, Rs. 23,012-6-0, which the assessee obtaining in the account year and which was on account of the balance of interest on a certain mortgage, should be shown as the income of the assessee. The books of the assessee showed in the ledger of the mortgagor that there was this decretal amount credited to the mortgagor and also debited. The amount was also shown in what is called the interest ledger as an amount which was to be realized. It is not disputed that no part of the amount was realized during the year in question. The claim for the Department is that the books should be used for accounting and assessment in accordance with Section 13 of the Indian Income Tax Act. In other words, the proposition is that, although none of the decretal amount was received the assessee should be charged income tax on this amount, because the assessee has shown the amount in his books. We consider that the Department was correct in claiming that the assessment should be made on the books under Section 13; but we do not think that the Department had used the books in the right way. The Commissioner claims that under the ruling reported in Commissioner of Income Tax v. Kameshwar Singh of Darbhanga he is entitled to charge the assessee income tax on this decretal amount. We do not consider that this conclusion follows from that ruling. There have been a number of rulings to the contrary, such as, Secretary, Board of Revenue, Madras v. Arunachalam Chettiar; Pandurang Ramchandra Pande v. Commissioner of Income Tax; Commissioner of Income Tax v. Nanhelal; Commissioner of Income Tax v. S. M. Chitnavis; In the matter of Raghunandan Prasad Singh and Narain Das Bhagwan Das v. Commissioner of Income Tax; but we do not consider that this case has any bearing on the point. Learned counsel for the Commissioner referred to Section 5 of the Income Tax Act, which states that
'the Act shall apply to all income, profits or gains.... from whatever source derived, accruing or arising or received in British India, or deemed under the provisions of this Act to accrue or arise, or to be received in British India.'
His argument was that the words 'accruing or arising' would apply to this decree. We consider that these words merely refer to the connection between the income and the country in question, British India, and that they do not explain what is income or what is not income. We consider that words used in an Act should be interpreted in their ordinary sense, except when it is shown that they have been used in a special or technical sense. The ordinary sense of 'income' is what comes in, that is, what is actually received by an assessee. There is nothing in the Act to show that this ordinary meaning is not attached to the word. 'Income' is not actually defined in the Act, but in Section 2 (15) 'Total Income' is stated to mean the 'total amount of income, profits and gains from all sources to which this Act applies computed in the manner laid down in Section 16'. There is nothing in this definition or in Section 16 which would imply that the 'total income' was to include an amount which had been decreed but which had not been received. Accordingly our finding is on the first question in the negative, that the unrealized decree is not taxable income for the purpose of income tax; and our answer on the second question is that the assessee was correct in stating that the books were kept simply for the purpose of ascertaining his financial state. Accordingly we direct this reference be returned to the Commissioner and we allow to Mr. Verma a fee of Rs. 150, and the amount which has been certified for the assessee will be allowed as costs against the Department.
Reference answered accordingly.