1. These three appeals are by the assessee against the orders of the Commissioner (Appeals), all dated 10-3-1981. The assessment years involved are 1974-75, 1976-77 and 1977-78. Since common issues are involved in all these appeals, they are heard and disposed of together by this common order for the sake of convenience.
2. In appeal relevant to the assessment year 1974-75 the only issue for our consideration is whether the Commissioner (Appeals) has erred in holding that sum of Rs. 5,79,777 being the amount of subsidy for which bills had been submitted by the assessee to the Government had become due to the assessee in the previous year relevant to the assessment year under consideration. The facts in short are that during the previous year which ended on 30-6-1973, there was famine in the State of Gujarat. Due to this famine, the Government of Gujarat decided to run Wadas through which fodder, etc., was to be provided to the catties by the Government itself or by some other agencies. In case the Wada was run by other agencies, the Government was to give subsidy to that agency and the revenue department of the Government has passed a resolution on 20-10-1972 sanctioning different cattle relief schemes, one of them being Wada scheme. Under this scheme the object was to preserve and maintain milk-yielding catties in various villages by bodies like Panchayats and other institutions which can run Wadas for providing fodder, drinking water, etc., to the catties. These institutions were to be subsidised by the Government at the rate of 75 paise per cattle per day. In case the expenses were more, the extra expenditure was to be borne by the institutions running the Wadas. The assessee, Bavla Gopalak Vividh Karyakari Sahakari Mandli, was doing business of collecting milk and supplying it to Ahmedabad Dairy for the distribution of milk to the public. Therefore, the assessee approached the Collector under the scheme to run 54 Wadas and finally opened 49 Wadas 13 being in Sanand village and 36 being in Dholka Taluka. The assessee gave fodder to catties in these Wadas for which the assessee submitted two bills to the Government of Gujarat. One bill was for Rs. 3,51,452 for Wadas run in Dholka Taluka and the other bill was for Rs. 2,18,325 for Wadas run in Sanand Taluka totalling to Rs. 5,69,777 for the period from 25-3-1973 to 9-5-1973 and subsidy had been claimed under the scheme. The Government did not agree for payment of subsidy for the reason that the assessee had not run the Wadas in accordance with the directions of the Government and when the assessee has violated the conditions for subsidy, it is not entitled for subsidy.
The dispute regarding payment of such subsidy is pending before the High Court of Gujarat. Before the ITO, the assessee claimed that in view of these facts the amount of Rs. 5,69,777 is not income accrued to the assessee in the year under consideration, The ITO did not agree with the claim of the assessee. According to him, once the assessec has run the Wadas under the scheme and sent the bill to the Government, the income is accrued and the assessee is liable to pay tax thereon in the year under consideration.
3. In appeal, the Commissioner (Appeals) has followed the decision of the Madras High Court in the case of Thiagaraja Chetiiar & Co. v. CAT  51 ITR 393 and confirmed the view taken by the ITO. Being aggrieved, the assessee came in appeal before us.
4. The submission of the learned Counsel for the assessee, Shri Divatia, was that it is true that the assessee had run Wadas under the scheme but the payment of subsidy was on conditions and unless those conditions are fulfilled and the Government is satisfied the question of income for so-called subsidy does not arise. In this case the letter from the Government reveals that they arc not satisfied with the claim of the assessee. According to them, the assessee is not entitled for subsidy. Finally, the assessee has given notice to the Government under Section 80C of the Income-tax Act, 1961 ('the Act') and in the written statement of the Government also they have denied the liability to pay subsidy to the assessee. The matter is finally pending before the High Court of Gujarat. In view of these facts, the income so far as subsidy is concerned, does not accrue to the assessee in relation to the assessment year under appeal. He relied on Dhrangadhra Chemical Works Ltd. v. C/7' 106 ITR 473 (Bom.), E.D. Sassoon & Co. Ltd. v. CAT  26 ITR 27 (SC) and Amur Nath Khanddwal v. CIT  126 ITR 322 (Delhi). On the other hand, the learned departmental representative, Shri J.P. Jani, submitted that when the assessee has renedred some services by running Wadas, some income has accrued to the assessee and, therefore, the assessee is liable to pay tax in the year under consideration. He relied on CIT v. Spunpipe & Construction Co. (Baroda) (P.) Ltd., Rajan Ramkrishna v. CWT  127 ITR 1 (Guj.), CIT v.South Arcot District Co-operative Supply & Marketing Society Ltd.  127 ITR 467 (Mad.), Morvi Industries Ltd. v. CIT  82 ITR 835 (SC) and Cooper Engg. Ltd. v. CIT  135 ITR 597 (Bom.).
5. We have heard the rival submissions and considered the material on record. The Government have passed a resolution on 20-10-1972 wherein it was decided that on account of drought and famine there was scarcity of fodder for the catties and, therefore, in order to save cattle wealth in the affected areas the Government has started various schemes. Under that scheme if some agency other than the Government provides fodder to the catties, the Government will pay 75 paise per day per cattle subject to the conditions fulfilled by such agency but the subsidy will be given only subject to the conditions prescribed by the Government and fulfilled by such agency. The assessee has filed such orders at pages 9, 13 and 20 of the assessee's paper book. The assessec has approached the Collector and registered about 54 Wadas under the scheme and claimed subsidy of Rs. 5,79,777. A letter dated 11-5-1973 was written by the Collector concerned to the assessee stating that the Wadas maintained by the assessee are not in consonance with the Wada scheme and asking the assessee to submit the report in this behalf to the Collector. The assessee has claimed that the assessee is entitled for the subsidy. Ultimately a notice under Section 80 of the Code of "Civil Procedure, 1908, was sent to the Government regarding the claim and finally, the assessee has filed civil suit in the civil court praying for relief of Rs. 5,69,777. In a written statement by the Government the liability to pay such subsidy is denied. A copy thereof is placed at page 72 of the assessee's paper book. The civil court has allowed the claim of the assessee. The matter is pending in the High Court. Now, on these facts, the only issue is whether the assessee is liable to pay income-tax on the amounts in question in year under consideration. The learned Counsel for the assessec relied on the decision of the Bombay High Court in the case of Dhrangaclhra Chemical Works Ltd. (supra). There, the facts were that the Government has allowed subsidy or grant on the sale of soda ash sold at a reasonable price. The sales were in the year 1951-52. Subsidy was finally sanctioned and paid in 1954. The issue was as to when the subsidy should be assessed as income. Their Lordships have observed as under: The short question that we have to consider on the facts of this case is when the right to receive the sum of Rs. 2,03,903 accrued or arose to the assessee for the first time. Did it accrue at the time when the sale was effected in the relevant accounting period or it accrued at the time when the Government was satisfied as regards the appropriate rate at which soda ash was sold and agreed to pay the amount of subsidy Even though the Tribunal in its order has stated that this is not a case where the satisfaction of the Government as to the actual sale at the price fixed by the Government came into play at all or prevented or stopped accrual of the income, it is quite clear that the claim made in the notice as well as in the suit has not been accepted in toto by the Government. Actually, under the resolution of the Government, the right to subsidy at the rate of Re. 1 per cwt. would arise for the first time not by mere reason of sale of soda ash but only when the Government was satisfied that the assessee actually sold soda ash at the fair selling prices recommended by the Tariff Board. In the recommendations of the Tariff Board it is clearly pointed out that the assessee-company was expected to sell soda ash at the rate of round about Rs. 15.35 per cwt. When the Government is satisfied that it had been sold at a fair selling price as recommended by the Tariff Board, then alone a right will accrue to the assessee-company to ask for subsidy.... (p.
484) Further, it was also observed at page 485 of the report that the amount accrued only in the year when it is received. In the case of Amar Nath Khandelwal (supra) the case before their Lordships was that agency business was carried on by the assessee, The assessee has transferred the assets and liabilities to the firm. Commission for work done by the assessee before transfer of business was paid to firm. Now, the issue was as to when the commission was accrued. Their Lordships have taken the view that commission was accrued only when the bill for commission was accepted by the principal. Therefore, the commission income was accrued to the firm and not to the assessee. Therefore, their Lordships relied on the decision in the case of E.D. Sassoon & Co. Ltd. (supra).
By this decision, the learned Counsel for the assessee tried to point out that the mere sending of bill is not enough for accrual of income.
Income is accrued only when the other party has accepted the claim. So far as the claim of the learned departmental representative is concerned, his main reliance was on the decision of the Gujarat High Court in the case of Spunpipe & Construction Co. (Baroda) (P.) Ltd. (supra). The facts in short are that the assessee had supplied certain items to the Government during the assessment year 1959-60. The price received was in excess. The difference received was credited in the suspense account. In the assessment years 1965-66 and 1966-67 also, the assessee sold certain items to the Government and charged excess sales tax. Such excess was again put in suspense account. Finally, the amounts were brought to the profit and loss account in the assessment year 1971-72. The ITO taxed this amount as income of the assessee in the assessment year 1971-72. Their Lordships held that the said amount could have been taxed in the relevant assessment years in which they were received by the assessee and the failure on the part of the department to tax them in those years cannot give the department the right to tax the assessee in the assessment year 1971-72 so far as the income therefrom is concerned. The facts of the case cited by the learned departmental representative are different because in this case the issue was regarding the trade receipts. If the ITO has failed to tax those trading receipts in the relevant years, the same cannot be taxed in the assessment year 1971-72 and those trading receipts are not in dispute while in the case under consideration the subsidy amount itself was in dispute, whether it should be paid or not. Therefore, we do not agree with the learned departmental representative that the case is covered by the case of Spunpipe & Construction Co. (Baroda) (P.) Ltd. (supra).
6. The other cases cited by the learned departmental representative are Rajan Ramkrishna's case (supra), South Arcot District Co-operative Supply & Marketing Society Ltd.'s case (supra), Morvi Industries Ltd.'s case (supra) and Cooper Engg. Ltd.'s case (supra). In all these cases, the facts are different and mostly related to the trading receipts but in the case under consideration the facts are more similar to the facts of the case considered by their Lordships of the Bombay High Court in Dhrangadhra Chemical Works Ltd.'s case (supra). Therefore, following the view taken by their Lordships of the Bombay High Court and reasons given therein, we are of the view that till the final decision on the dispute regarding subsidy, it cannot be said that income has accrued to the assessee in the year under consideration. Income cannot be accrued unless the dispute is finally decided or amicably settled by both the parties and it can be taxed only in the year of accrual when the issue is decided or settled and amount received by the assessee. Therefore, in the year under consideration it cannot be taxed.
8. In the result, appeal for the assessment year 1974-75 is allowed while the appeals relevant for the assessment years 1976-77 and 1977-78 are dismissed.