Mukerjee, J. - (1.) THE question on which I am required to give my opinion in this case is : "Whether, the sum of Rs. 15,000 debited by the assessee in the profit and loss account on the last day of the accounting year, relevant to the assessment year 1958-59, represents an ascertained liability on the mercantile system of accounting deductible in the computation of its income, profits and gains under Section 10 of the Indian Income-tax Act, 1922, for the assessment year 1958-59 ?"
(2.) SAHAI J. and Pathak J. have differed in their answer to this question; SAHAI J. answered the question in the negative, while Pathak J. answered it in the affirmative. The facts giving rise to this reference have been set out in the orders of the two learned judges. I would like to state a few more facts to show, precisely, how the amount in question, viz., Rs. 15,000, came to be debited in the accounts of the assessee as its liability to sales tax. These facts would be relevant in connection with a contention raised by Dr. I. Mishra appearing for the revenue. The assessee is a firm which was accorded registration under Section 26A of the Income-tax Act, 1922 (hereinafter referred to as "the Act"), for the relevant assessment year 1958-59, the previous year being the period from the 9th July, 1956, to the 28th June, 1957. The firm deals in cloth on wholesale basis at Pratapgarh and it maintains its accounts on mercantile basis. It is assessed to sales tax under the U.P. Sales Tax Act on sales of cloth purchased from outside Uttar Pradesh.
(3.) THE assessee, however, did not maintain a separate account in respect of such sales. During the relevant year the assessee estimated such sales at Rs. 4,24,226 on the basis of the ex-U.P. purchases for which it maintains a separate account. Until the 31st March, 1956, sales tax on cloth imported from outside Uttar Pradesh was levied at six pies per rupee. On the 31st March, 1956, the Governor of U.P. issued an Ordinance (No. 9 of 1956), declaring that the turnover in respect of goods imported from outside Uttar Pradesh shall be liable to sales tax at one anna in the rupee with effect from 1st January, 1956. On the same date, the Government published a notification (No. S.T. 905/X) under Section 3A of the U.P. Sales Tax Act notifying the Ordinance promulgated by the Governor. In due course, the U.P. Sales Tax Ordinance was replaced by the U. P. Sales Tax (Amendment) Act (19 of 1956), incorporating the provisions of the Ordinance and stating that the amendment shall be deemed to have effect on and from 1st April, 1956. The notification was struck down by a Full Bench of this court in the case of Adarsh Bhandar v. Sales Tax Officer, (1) [1957] 8 S.T.C 666; A.I.R. 1957 All. 475 (F.B.). The judgment in the case was pronounced on the 9th May, 1957.;