JUDGMENT
A. Lakshmana Rao, J.
1. For the assessment year 1984-85, the respondent herein claimed that an amount of Rs. 50,770 shall be deleted from the taxable income on the ground that the liability to pay tax under the A. P. General Sales Tax Act and the Central Sales Tax Act became due during the relevant accounting year. The Income-tax Officer rejected that claim. However, on appeal, the Commissioner of Income-tax (Appeals) accepted the claim made on behalf of the assessee. Aggrieved by that order, the Department preferred a second appeal to the Income-tax Appellate Tribunal. The Tribunal dismissed the appeal holding that (1) “the assessee had not claimed any deduction towards sales tax liability from its profits. In other words, the sales tax collections and payments have been kept in a separate account. No part of the sales tax payment had been charged against the profit and loss account; and (2) though the sales tax collections are viewed as trading receipts, as the assessee is following the mercantile system of accounting, a corresponding liability to pay the tax into the coffers of the Government arises the moment sales are made”. The Department sought reference of the following question :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the provisions of section 43B, cannot be invoked to disallow under the Andhra Pradesh General Sales Tax Act and Central Sales Tax Act liabilities which have not fallen due for payment within the accounting year?”
2. The Tribunal refused to refer that question in view of the decision of this court in Srikakollu Subba Rao and Co. v. Union of India . Hence, this petition is filed under section 256(2) of the Income-tax Act.
3. It is submitted by Sri M. Suryanarayana Murthy, learned standing counsel for the Income-tax Department, that at the time when the reference application filed under section 256(1) of the Income-tax Act was disposed of by the Tribunal, section 43B of the Income-tax Act, in its present form, was not in existence and, therefore, it had no opportunity to decide the matter in the light of the amended provisions of section 43B.
4. Having regard to the facts and circumstances of the case, in particular the finding recorded by the Tribunal and the amended provisions of section 43B of the Income-tax Act, we are of the view that the question which the Department wanted to be referred to this court for opinion requires modification. Therefore, we direct the Income-tax Appellate Tribunal to state the case and refer the following question of law for the decision of this court :
“Whether, having regard to the provisions of section 43B as amended by the Finance Act of 1989 (which came into force with retrospective effect from April 1, 1984, the finding of the Income-tax Appellate Tribunal with regard to the allowance of the amounts representing the tax liabilities under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act, though not actually paid during the relevant accounting year, is valid in the facts and circumstances of the case?”
5. The income-tax case is, accordingly, allowed. No costs.