Sudhindra Mohan Guha, J. - (1.) In this reference at the instance of the Commissioner of Income-tax, we are faced with the question, viz. : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in, holding that the provision of Rs. 1,84,734 for sales tax liability was allowable as a deduction in computing the business income of the assessee-company ? "
(2.) The assessee is a private limited company and the reference relates to the assessment year 1971-72. For this assessment year, the assessee-company claimed a deduction of Rs. 1,84,734 on account of sales tax liability on sales of " Kuil " and " Star " brand matches. The ITO, however, was of the view that since under the West Bengal Sales Tax Act, sales tax was not payable on sale proceeds of matches made or processed otherwise than in a factory as defined in the Factories Act, 1948, and matches in which match sticks were made from bamboo splints came under that category, sales tax was not attracted on sales of those two brands of matches and the assessee had also not been asked to pay sales tax on these sales when the sales tax assessment was made. He did not agree with the assessee-company that since the assessment already made was sought to be reopened by the sales tax authorities for which a notice dated 27th January 1973, had been given and the proceedings in respect of which were still pending, the assessee's claim should be allowed. He, therefore, disallowed the claim for deduction.
(3.) The asaessee went up in appeal before the AAC. The AAC accepted the assessee-company's claim for deduction of Rs. 1,84,734 on account of sales tax liability in respect of sale proceeds of " Kuil " and " Star " brand matches.;