UPENDRALAL WAGHRAY, J.

( 1 ) AT the instance of the Revenue, the following question has been referred for the opinion of this court under section 256 (1) of the Income-tax Act, 1961 :"whether, on the facts and in the circumstances of the case, the sales tax of Rs. 2,16,343 collected but not paid by the assessee during the previous year relevant to the assessment year 1976-77 is includible or not in the total income of the assessee ?"

( 2 ) THE relevant assessment year is 1976-77. The assessee claimed deduction in its return of a sum of Rs. 2,16, 343 collected by it towards sales tax, but which was not remitted to the State Government during the previous year relating to the assessment year. According to the assessee, there is no dispute about the liability to pay this amount to the State Government which, as a matter of fact, was collected as sales tax. It is not in dispute that the assessee follows the mercantile system of accounting. The Income-tax Officer has disallowed the aforesaid claim of the assessee and included the said sum as part of its income. On appeal, the first appellate authority accepted the contention of the appellant and granted relief. This also has been confirm

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