JUDGMENT

SINGH, J.:— This appeal is directed against thejudgment and order of the Punjab and Haryana High Court dated 15-4-1975 answering the Income-tax Reference made to it by the Income-tax Appellate Tribunal.

2. Briefly, the facts giving rise to this appeal are that the appellant-Saraswati Industrial Syndicate is a limited company carrying on business of manufacturing and sale of sugar and machinery for sugar mills and other industries. Another company, namely, the Indian Sugar and General Engineering Corporation (hereinafter referred to as the Indian Sugar Company) was also manufacturing machinery parts for sugar mills. On 28th September 1962 under the orders of the High Court the Indian Sugar Company was amalgamated with the appellant company. After the amalgamation, the Indian Sugar Company lost its identity, as it did not carry on any business. Prior to the amalgamation the Indian Sugar Company had been allowed expenditure to the extent of Rs. 58,735/- on accrual basis in its earlier assessment. The Company had shown the aforesaid amount as a trading liability and the said trading liability was taken over by the appellant company. After amalgamation the appellant company clai