M.N. CHANDURKAR, C.J.
1. In the assessment proceedings for the assessment year 1973-74, the assessee company claimed deduction on account of liability to Central sales-tax to the extent of Rs. 1,40,316 in respect of sales that had taken place during the accounting year 1957-58. In order to understand the nature of this deduction, it is necessary to state a few facts. In the accounting year 1957-58, the assessee-company which deals in cotton was assessed on the total and taxable turnover of Rs. 12,77,734.80 and Rs. 12,76,440.27 respectively under the Central Sales Tax Act, 1956. The Assistant Commercial Tax Officer who made the assessment did not deduct the Central sales tax collections made by the assessee for the period from July 1, 1957, to November 15, 1957, and the assessee, therefore, appealed to the Appellate Assistant Commissioner of Commercial Taxes. This appeal, however, came to be dismissed on December 5, 1960. Thereafter, the Board of Revenue in exercise of its revisional jurisdiction under section 34 of the Madras General Sales Tax Act took the view that the turnover assessed in the case of the assessee represented only the sale value of cotton despatched by the assessee from Madras State to mills in other States and apart from the above transactions, the assessee had sold cotton to mills inside the State as also to mills outside the State during the movement of the goods from one State to another. These sales, according to the Board of the Revenue, fell under section 3(b) of the Central Sales Tax Act, 1956, and were assessable. By its order dated February 28, 1964, the Board of Revenue refixed the taxable turnover as Rs. 1,53,07,997.75 which was taxable at 1 per cent.
2. The assessee brought the matter to this court in the form of Tax Case No. 244 of 1964. This court held following the decision of the Supreme Court in State of Mysore v. Lakshminarasimhiah Setty and Sons : [1965]2SCR129 that the inter-state transactions of the assessee in cotton were not taxable under the Central Sales Tax Act, 1956, since the sale of cotton was taxable at the stage of last purchase only under the Madras General Sales Tax Act, 1939. The order of the Board of Revenue was, therefore, set aside.
3. The State of Madras preferred an appeal against the judgment of this court before the Supreme Court being Civil Appeal No. 565 of 1967. However, during the pendency of the Supreme Court appeal, an Ordinance came to be issued, called the Central Sales Tax (Amendment) Ordinance, 1969, dated June 9, 1969. This Ordinance was later replaced by the Central Sales Tax (Amendment) Act, 1969. The effect of this amendment made originally by the Ordinance and later by the Act retrospectively was that tax on inter-State sale of goods became payable notwithstanding the fact that no tax would have been levied under the sales tax law of the appropriate State as the sale took place inside such State at that point. The further effect was that the turnover for the purpose of assessment of tax under the Central Sales Tax Act was to be determined in accordance with the provisions of the Act and the Rules made under the State law.
4. Having regard to the retrospective amendment of the Central Sales Tax Act, the appeal filed by the State of Madras against the judgment of this court in T.C. No. 244 of 1964 came to be allowed on January 7, 1971. The Supreme Court pointed out that in view of the effect of the amendment that retrospectively from the date on which the principal Act was enacted, i.e., from July 1, 1957, the turnover for the purpose of the Central Sales Tax Act, 1956, had to be determined in accordance with the provisions of that Act and the Rules made thereunder, the order of the High Court had to be set aside. The Supreme Court held that, in view of the amendment, the assessment to tax would be made in the light of the amended provisions. The Supreme Court ordered as follows :
'We accordingly direct that the orders passed by the High Court and the departmental authorities are set aside and the transactions of sale in respect of which tax is sought to be levied will be assessed to tax by the Assistant Commercial Tax Officer, Madurai, in the light of the Central Sales Tax Act, 1956, as amended by the Amending Act of 1969....'
5. The Supreme Court gave liberty to the assessee to raise all contentions as to the liability to be assessed to tax in respect of the transactions. Consequent upon this order of the Supreme Court, the Joint Commercial Tax Officer, Madurai-II, determined the tax liability of the assessee at Rs. 1,53,079.98 and giving credit for an amount of Rs. 12,764.40 which was already paid as tax, a demand notice was directed to be issued for Rs. 1,40,315.58. This order came to be made on August 31, 1972, i.e., in the account year 1972, for which the relevant assessment year would be 1973-74. This is how a deduction in respect of Rs. 1,40,316 was sought by the assessee. The Income-tax Officer disallowed the deduction on the ground that the original order of assessment under the Central Sales Tax Act had been made as early as on February 28, 1964, and the liability having arisen then, the assessee should have made the claim for the relevant assessment year.
6. In appeal, the Appellate Assistant Commissioner accepted the contention of the assessee that the liability to pay Rs. 1,40,316 towards Central sales tax in respect of the year 1957-58 arose only on August 31, 1972, during the relevant previous year and hence should be allowed for the assessment year 1973-74.
7. The Revenue filed an appeal against this order of the Appellate Assistant Commissioner before the Tribunal. The two learned members of the Tribunal delivered two separate orders but reached the same conclusion and dismissed the appeal. The learned Accountant Member took the view that 'during the year of account, a demand notice had been served on the assessee which was not merely a quantification of the liability if it existed but also a determination of the fact following the Supreme Court decision that a liability did exist' and that the assessee was justified as a prudent businessman that he should make provision for the liability only during this year. The learned Accountant Member also observed that the claim of the Department that the assessee should have claimed the amount in the year when the sales took place was not supported by any principle of accountancy relating to debiting and crediting of liabilities or accruals on the mercantile system of account. The learned Judicial Member also took the view that the claim of the assessee could not be disallowed on the ground that the assessee should have necessarily made the claim in the earlier years and that when the sales in question were made, they were not liable to be taxed as the law then stood. The appeal filed by the Revenue thus came to be dismissed. Arising out of this order of the Tribunal, the following question has been referred to this court under section 256(1) of the Income-tax Act, 1961 :
'Whether, on the facts and in the circumstances of the case, the assessee was entitled to the deduction of the sales tax liability of Rs. 1,40,316 for the assessment year 1973-74 ?'
8. In the course of the hearing, the learned counsel for the assessee has produced before us the order of the Supreme Court in Civil Appeal No. 565 of 1967, and the consequential order Of the Joint Commercial Tax Officer dated August 31, 1972. Since at the hearing, reference to these orders was found necessary, we are making these two orders as annexures to the statement Of the case. The order Of the Supreme Court will be treated as annexure D and the order of the Joint Commercial Tax Officer will be treated as annexure E to the statement Of the case.
9. The learned counsel appearing on behalf of the Revenue has in addition to the stand taken before the Tribunal contended that mere receipt of the demand notice was not enough to permit a deduction on account of sales tax liability and, according to him, the assessee could have claimed the amount in question as deductible properly in the year in which it was paid. The amount was admittedly paid on May 15, 1975. A further stand which has been taken now is that when the Supreme Court by the decision on January 7, 1971, held that the sales were taxable, then the assessee should have made provision for its liability in the year 1971 itself. The substance of the argument is that the amount would be deductible only either in the year in which the sales took place or in the year of actual payment or on the facts of the present case in the year in which the decision of the Supreme Court was given holding that the sales were liable to be taxed under the Sales Tax Act. The learned counsel for the assessee contends that there is no principle of accountancy which prevents the assessee from claiming, under the facts of the instant case, a deduction, when actually the liability was determined by order dated August 31, 1972. It is contended that in view of the decision of the Supreme Court in Yaddalam's case [1965] 16 STC 231, there never was any liability to pay Central sales tax in respect of the sales in question which took place in 1957-58. The decision of the Supreme Court in Yaddalam's case was given on November 10, 1964. The effect of that decision, according to the learned counsel, was that in 1957-58, the transactions in question were not taxable under the Central Sales Tax Act at all. In so far as the assessee itself is concerned, according to the learned counsel, till the decision of this court was set aside by the Supreme Court by order dated January 7, 1971, the sales in question were not at all taxable. In such circumstances, if the liability crystallized only by the order dated August 31, 1972, the assessee would be justified in claiming the deduction in the accounts for the year 1972 for which the assessment year would be 1973-74.
10. Now, it cannot be disputed that the effect of the decision in Yaddalam's case given by the Supreme Court in [1965] 16 STC 231, was that that was the law of the land under article 141 of the Constitution of India and in the year 1957-58 when the transactions took place, the transactions were not liable to assessment under the Central Sales Tax Act. These transactions became liable to Central sales tax only by virtue of the retrospective amendment made for the first time by the 1969 Ordinance which came into force on August 30, 1969. Notwithstanding the fact that the Ordinance had come into force to undo the effect of Yaddalam's case : [1965]2SCR129 , in so far as the assessee itself was concerned, there was a binding decision the correctness of which was pending in appeal before the Supreme Court. The position of law, therefore, would be that notwithstanding the amendment made by the Ordinance and the Amendment Act, in so far as the specific transactions in question were concerned, the order of the High Court by which the revisional order of the Board of Revenue was set aside continued to be binding and effective and in so far as the assessee was concerned, that order was set aside only on January 7, 1971, and it was for the first time on January 7, 1971, that the liability of the assessee to pay Central sale tax came to be determined. Even then, it would be difficult for us to hold that until the Commercial Tax Officer, who was directed by the Supreme Court to determine the tax, had made the assessment order, the liability was ascertained. That order came to be passed on August 31, 1972. The Supreme Court expressly gave liberty to the assessee to raise all contentions that were open to the assessee as to the liability to be assessed. The question in the instant case, therefore is not whether at any earlier point of time the assessee could have claimed this deduction but whether such a deduction could be claimed only on the footing that the liability became ascertained on August 31, 1972. If the position of law was that till January 7, 1971, the transactions of the year 1957-58 were not liable to Central sales tax, it was not necessary for the assessee to claim such deductions in the assessment years relevant to the accounting years in which the transactions had taken place. It is argued on the basis of the decision in the Kedarnath Jute Manufacturing Company's case : [1971]82ITR363(SC) , that in the case of sales tax, the liability arises in the year in which the sales took place. The Supreme Court had undoubtedly observed in that decision that the moment a dealer made either purchases or sales which were subject to sales tax, the obligation to pay the tax arose and although that liability could not be enforced till quantification was effected by assessment proceedings, the liability for payment of tax was independent of the assessment. That was a case in which the assessee followed the mercantile system of accounting and its case was that it was entitled to deduct from the profits and gains of its business liability to sales tax which arose on sales made by it during the previous accounting year. Substantially the question which fell for decision in that case was whether the stand taken by the Revenue was correct that the assessee was not entitled to claim a deduction of the amount of sales tax because it had denied the liability to pay the amount and had made no provision in its books with regard to the payment of that amount. The High Court had held that mere legal liability was not enough and there had to be an expenditure in the first place and further that unpaid and disputed sales tax could not be validly deducted in the computation of business income even under section 10(1) of the Act. It was the correctness of this view of the High Court which fell for decision before the Supreme Court. While reversing the decision of the High Court, the Supreme Court made the following observations (Kedarnath Jute Mfg. Co. v. CIT : [1971]82ITR363(SC) ) :
'An assessee who follows the melcantile system of accounting is entitled to deduct from the profits and gains of the business such liability which had accrued during the period for which the profits and gains were being computed. It can again not be disputed that the liability to payment of sales tax had accrued during the year of assessment even though it had to be discharged at a future date.'
11. Dealing with the question as to whether the fact that the assessee had challenged its liability had any effect on the claim for such deductibility, the Supreme Court referred with approval to the decision of this court in Pope the King Match Factory v. CIT : [1963]50ITR495(Mad) , and observed as follows (p. 366 of 82 ITR) :
'In Pope the King Match Factory v. Commissioner of Income-tax : [1963]50ITR495(Mad) , a demand for excise duty was served on the assessee and though he was objecting to it and seeking to get the order of the Collector of Excise reversed, he debited that amount in his accounts on the last day of his accounting year and claimed that amount as a deductible allowance on the ground that he was keeping his accounts on the mercantile basis. The Madras High Court had no difficulty in holding that the assessee had incurred an enforceable legal liability oll and from the date on which he received the Collector's demand for payment and that his endeavour to get out of that liability by preferring appeals could not in any way detract from or retard the efficacy of the liability which had been imposed upon him by the competent excise authority. In our judgment, the above decision lays down the law correctly.'
12. Now, the decision in Kedarnath Jute Manufacturing Company's case : [1971]82ITR363(SC) cannot, in our view, be read as laying down that a liability by way of sales tax can be claimed as a deduction only in the year in which the sales took place. That may be the earliest period during which such a claim for deduction could be made. We must point out that when the Supreme Court approved the decision of this court in the Match Factory's case : [1963]50ITR495(Mad) , apart from approving the observations that even though a certain liability is disputed by way of appeal, the amount demanded by the Collector of Central Excise can he debited in the accounts, those observations, in our view, also indicate that a demand made by the Collector of Central Excise would also enable the assessee to claim a deduction in respect of that demand. Those observations show that the amount was deducted only after the order of the Collector was received and though the decision of this court was quoted as laying down the correct law on the proposition that a disputed demand could well be claimed by way of deduction, in our view, this decision also lays down that where a demand is received, that can properly form the basis of a valid deduction. It would not be, therefore, proper for us to read the decision in Kedarnath Jute Manufacturing Company's case : [1971]82ITR363(SC) , as laying down that the year in which the sales had taken place is the only year in which the deduction could be claimed. Another decision on which reliance has been placed by the learned counsel for the Revenue is the decision in CIT v. T. S. Srinivasa Iyer : [1984]146ITR526(Mad) . In that decision, the assessee was claiming a deduction by way of urban land tax. A notice of demand for payment of urban land tax of Rs. 52,059 was raised for the year 1970-71 in respect of which year the assessment proceedings were pending. Though this deduction was disallowed by the Income-tax Officer on the ground that the urban land tax could not come in as a business deduction, the other ground on which it was disallowed was that the deduction related to prior years. The Urban Land Tax Act, 1966 was held to be invalid by this court but the Supreme Court by judgment dated April 11, 1969, held that the Act was valid. The Tribunal permitted a deduction for the year 1970-71. When a reference was brought to this court at the instance of the Revenue, this court held that the Supreme Court having held the Act to be valid in 1969, the assessee could have made a provision for liability of the urban land tax only after the decision of the Supreme Court and this should have been done before the accounts were closed on July 7, 1969, and then only, according to this court, it would have been entitled to the deduction on the basis of the mercantile system of accounting adopted by the assessse regularly for its business. But, on facts, this court took the view that the fact that no such provision was made in the accounts would not be material for allowing the claim for deduction made by the assessee and that it was enough if the system of accounting usually followed by the assessee was such as to allow a provision being made in this regard in its accounts. The amount was, therefore, permitted as deductible. The conclusion reached by this court in that decision will, therefore, show that notwithstanding the fact that immediately after the decision of the Supreme Court, the liability by way of urban land tax was not shown in the accounts, this court permitted the deduction observing that 'this book-keeping omission, however, is not material for the claim of deduction'. Once again the argument of the Revenue in that case was that the date of payment was the date of accrual of the liability. It was this argument which has been rejected by this court. The following observations are, in our view, significant (p. 537 of 146 ITR) :
'Having regard to the nature of the Urban Land Tax Act as laid down in the Supreme Court's judgment above quoted, we are satisfied that the assessee, who is maintaining accounts under the mercantile system would be well within its right in making a claim for deduction for the urban land tax liability even prior to the actual demand being made on it by the concerned taxing authority, and if it should make such a claim whatever provision it has made would be eligible for deduction as a charge against profits for the purpose of computation of their business income. It is but a very small next step to further hold that even in the absence of any actual provision being made in the assessee's accounts, a deduction would be permissible on the basis of the decision of the Supreme Court in Kedarilath Jute . v. CIT : [1971]82ITR363(SC) .'
13. The above observations will, therefore, indicate that the case of the Revenue before this court was that unless there is a demand made, there is no liability, - a contention which is exactly contrary to the contention which is now raised in this reference. It is significant to note that in Srinivasa Iyer's case : [1984]146ITR526(Mad) , even though a demand was not made, the deduction was held to be permissible. This only means that a deduction would also be permissible when the demand is made if that deduction is not claimed earlier. This decision, in our view, does not in any way support the case of the Revenue. To the same effect is another decision in respect of urban land tax reported in CIT v. Gemini Pictures Circuit P. Ltd. : [1984]146ITR540(Mad) . The question which was posed in that case was whether, on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to deduction of the entire urban landtax paid during the accounting year even though a part of it related to the earlier years. This question was answered by this court on the footing that the question was concluded by the judgment delivered in Srinivasa Iyer's case : [1984]146ITR526(Mad) , cited supra. While referring to the decision in Srinivasa Iyer's case, the Division Bench observed (p. 542) :
'We further hold that any assessee following the mercantile method of accounting is entitled to make a provision for urban land tax liability in the year in which it was known as a definite liability, even without waiting for an actual assessment to be made and a demand to be raised by the authorities concerned. Following that decision, we hold that the Tribunal was right in this case in allowing the entire liability claimed by the assessee during this year.'
14. It may be noted that the liability which has been decided upon was for a period of seven years from July 1, 1963, and the assessment was claimed in the accounting year ending March 31, 1971, relevant to the assessment year 1971-72.
15. Reference is also made on behalf of the Revenue to another decision of the Madras High Court in M. S. Balakrishna Chetty v. CIT : [1975]101ITR557(Mad) . In that case, the sales tax authorities determined the turnover of the assessee for 1955-56 and 1956-57 at ten times the turnover not disclosed in the returns and added the same. In revision, the High Court adopted the multiple of seven. During the pendency of the revision, the assessee obtained a direction to pay the disputed tax of Rs. 26,317 in monthly instalments of Rs. 1,000 each and paid the entire sum before April 1, 1961. In its accounts for 1963-64, relevant for the year ending March 31, 1963, the assessee adjusted a sum of Rs. 23,389 as sales tax liability, which sum was arrived at after adjusting the refund received in pursuance of the High Court's order and claimed this amount asa deduction in its income-tax assessment for the said year. The tax authorities and the Tribunal rejected this contention. In reference, this court took the view that the sales tax liability would be referable only to the year in which the relevant transaction of sale or purchase took place which was in 1955-56 and 1956-57, since the assessee had adopted the mercantile system of accounting and hence the liability did not arise in the year 1963-64, for being allowed as a deduction in that year. Even on the basis of payment, it was held that the amount having been paid prior to April 1, 1961, the claim for deduction cannot be made on the basis of payment made in the assessment year 1963-64. It was further held that the fact that the assessee had adjusted this amount of sales tax only in the account year relevant to the assessment year 1963-64, was neither decisive nor conclusive. This decision proceeds on the footing that the liability of the assessee arose in the year of sales as laid down by the Supreme Court in Kedarnath Jute Manufacturing Company's case : [1971]82ITR363(SC) . But it is important to point out that in that case, the Supreme Court observed that the allowability of the amount depended upon only the provisions of law relating thereto. The question as to in which year the sales tax liability should be allowed to be deducted cannot in all cases be decided upon a general proposition of law. The present case is a clear illustration that there may be exceptions to the rule that even though a liability statutorily arose in the year in which the sales were made, factually the liability never existed in law and it is only after the decision of the Supreme Court was given effect to by the Commercial Tax Officer that the liability came to be crystallized.
16. The last decision relied upon is the decision in CIT v. V. Krishnan : [1980]121ITR859(Mad) . In that decision, the Division Bench proceeded on the footing that the demand for sales tax for the years 1966-67 and 1967-68 was raised on August 31, 1971, and no provision having been made in the respective years, i.e., 1966-67 and 1967-68, the amounts were not deductible because there was no provision in the Sales Tax Act to show that the existence of a demand is a condition precedent to the liability arising and the court took the view that the liability to sales tax would ordinarily relate to the year in which the transaction took place. It was found that the year in which the disputed demand was received was not the year in which either the liability to tax arose because of the transactions having been effected during that year nor in which the assessee had paid the tax and hence the amount in question could not be allowed as a deduction in that year. The main circumstance which seems to have weighed with the Division Bench while disallowing the deduction was the view that on August 31, 1971, only a notice of demand was issued as will be clear from the following observations (p. 862) :
'There is nothing in the Sales Tax Act which would require the issue of demand notice as a condition precedent for making it a liability. In these circumstances, the assessee's claim could not have been allowed as a deduction by the Tribunal in the year under consideration.'
17. We have sent for the original records of this tax case and we find that what happened on August 31, 1971, was not that a notice of demand was issued but two assessment orders, one for the account year 1966-67 and the other for the account year 1967-68 were made on August 31, 1971. August 31, 1971, was primarily, therefore, the date on which the assessment order was passed. It is true that under rule 16 of the Tamil Nadu General Sales Tax Rules, there is an obligation on the assessing authority to serve upon a dealer a notice in Form No. B-3 and/or Form No. B-9 when an amount is found due from the dealer towards the final assessment or revision of assessment. This notice may be served along with the order itself. But in Krishnan's case : [1980]121ITR859(Mad) what happened on August 31, 1971, was that the assessment order itself was passed. It is not for us to speculate as to what view the Division Bench would have taken if August 31, 1971, would have been considered by the Bench as the date on which the assessment order was passed and the liability of the assessee was finally determined. The observations relied upon by the Revenue are as follows (p. 862) :
'There may be cases where the assessee is not in a position even to estimate his liability because whether the transaction is liable to sales tax at all or not may itself be in dispute. In certain other cases, the question in dispute may relate to the point as to whether the tax liability arose on a single point or multipoint. There may even be cases where the sales tax department would raise estimated assessments and the assessee is obliged to pay sales tax in which case the assessee may not know about the existence or quantum of liability. In all these cases, it may not be possible even for a person maintaining his accounts on the mercantile basis to provide for the liability in the year to which it could be related taking into account the transactions of sale. In such cases, the assessee's claim for deduction would arise for consideration either in the year in which the assessee accepts the liability or in the year in which the amount is paid.'
18. Relying on these observations, the learned counsel for the Revenue contends that there are only two years in which a deduction by way of sales tax may be permissible, one either in the year in which the assessee accepts the liability or the other in the year in which the amount is paid. The learned Judges have not elaborated the concept of acceptance of liability referred to by them but if it was intended to convey when it was observed 'the assessee's claim for deduction would arise for consideration either in the year in which the assessee accepts the liability or in the year in which the amount is paid' that the assessee does not dispute the liability even by way of appeal, these observations may run counter to the decision of the Supreme Court in Kedarnath Jute Manufacturing Company's case : [1971]82ITR363(SC) . There is nothing to prevent the assessee from claiming a deduction in respect of a sales tax liability notwithstanding the fact that he challenges that liability in the manner permissible by law. The cases referred to by the learned Judges cannot, in our view, be taken to be as exhaustive of all contingencies with regard to deductibility in respect of sales tax.
19. The learned counsel for the assessee has relied upon a decision of the Gauhati High Court in CIT v. Nathmal Tolaram [1973] 88 ITR 234 in which it has taken the view that though the assessee who was maintaining his accounts under the mercantile system did not make any provision for payment of sales tax in respect of transactions during the periods ending March 31, 1949, to March 31, 1950, but claimed deduction when the demand for sales tax was made only in the accounting year 1957-58, that deduction was allowed on the ground that a final demand for sales tax was made only during the previous year relevant to the assessment year 1958-59 and it was, therefore, properly allowable as deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922. The Gauhati High Court took the view that in the absence of a legal bar in the way of the assessee claiming the expenditure in the year of demand for which provision has already been made in the accounting year, deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, was permissible. The Division Bench in Krishnan's case : [1980]121ITR859(Mad) has undoubtedly not agreed with the view taken by the Gauhati High Court. The reasons for not agreeing with the decision of the Gauhati High Court as given by the Division Bench were as follows (p. 863 of 121 ITR) :
'The Income-tax Act takes the relevant previous year as a unit for the purpose of making an assessment. Therefore, the eligibility for deduction will be dependent on what had happened during the previous year. In the absence of any provision to show that the existence of a demand is a condition precedent to the liability arising, the liability to tax, as pointed out by the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT : [1971]82ITR363(SC) , would ordinarily relate to the year in which the transactions took place.'
20. We must with reference to these observations point out that these observations proceed on the footing that what happened on August 31, 1971, was that a demand notice was sent which was not the correct position. Secondly, the Division Bench itself has observed that 'the liability to tax... would ordinarily relate to the year in which the transactions took place'. The use of the word 'ordinarily' would itself indicate that there could be other cases where such liability may not take place in the year in which the sale transactions had taken place.
21. It is, however, not necessary for us to go into the question whether we should follow the decision of the Gauhati High Court referred to above because in the instant case, on facts we are inclined to take the view that since no liability to tax existed till the decision of the Supreme Court was given effect to, the liability must be held to have arisen for the first time on August 31, 1972, which falls within the accounting year relevant to the assessment year 1973-74. It is, therefore, clear to us that the Tribunal was justified in taking the view that the assessee was entitled to the deduction of Rs. 1,40,316 for the assessment year 1973-74. The question referred to us is, therefore, answered in the affirmative and in favour of the assessee. The Revenue to pay the costs of this reference-Costs Rs. 500.