JUDGMENT

P. Venkatarama Reddi, J.-The opinion recorded by the Kerala High Court in ITR No. 16 of 1997 has given rise to this appeal filed by the Chief Commissioner of Income-tax. The dispute relates to the assessment year 1985-86. At the instance of the Revenue the following question was referred under Section 256(1) of the Income-tax Act for the opinion of the High Court :

Whether on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that Rs. 3,02,758/- cannot be brought to tax and in deleting the addition of Rs. 3,02,758/- sustained by CIT (Appeals)?"

The High Court accepted the view of the Tribunal which partly allowed the appeal of the assessee and answered the question in favour of the assessee.

2. The facts in brief are: The respondent-assessee is engaged in the business of tea, spices etc. During the assessment year 1985-86 (previous year ending on 31.3.1985) the assessee wrote-back in its accounts a sum of Rs.14,65,997/- representing the provision made during earlier years (1978-1981) towards its purchase tax liability, it appears that the liability to pay purchase tax on certain goods was in dispute and, therefore, the provis