Ajit K.Sengupta, J. - (1.) In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1975-76, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that sales tax liability of rupees one lakh five thousand and three hundred and ten only pertaining to the previous year ended December 31, 1970, arose when the demand notice was received in 1974 and was deductible in accounting the total income for the assessment year 1975-76."
(2.) Shortly stated, the facts leading to this reference are that the assessee claimed deduction of Rs. 2,21,386 during the year under appeal being liability for sales tax pertaining to the accounting years ending December 31, 1970, and December 31, 1971. The assessee's case before the Income-tax Officer was that it came to know for the first time on December 14, 1974, that it was under an obligation to pay sales tax on the goods imported for supply of the same to the Director-General of Supplies and Disposals which are specifically excluded as per terms and conditions contained in the schedule for acceptance of tenders for supply of those goods to the Director-General of Supplies and Disposals. The Income-tax Officer found from the Sales Tax Officer's order that the assessee, under a wrong impression that its case was covered by the decision of the Supreme Court in the case of K. G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473, did not pay sales tax within the years in which sales were effected. He further found that the assessee was to pay the sales tax within the respective accounting periods in view of the later decision of the Supreme Court in the case of Binani Bros. (P.) Ltd. [1974] 33 STC 254. He, therefore, came to hold that the assessee's liability to pay sales tax accrued within the respective years of sale and as such, its claim for deduction of Rs. 2,21,386 was not allowable during the assessment year under appeal, the accounting period for which began much later than the years in which sales were effected.
(3.) On appeal, the Appellate Assistant Commissioner found that the assessee's tender for supply of hydraulic buffer oil and lubricating oils was accepted by the Director-General of Supplies and Disposals with the following conditions : "Prices are exclusive of sales tax, but as the sales are being made through import of finished products, no sales tax is leviable in this case.";