An assessee is entitled to claim deduction for provision made for purchase tax liability, if there is a liability to pay the tax.

( 1 ) THIS reference under Section 256 (1) of the Income-tax Act is at the instance of the Revenue. The Tribunal has referred the following questions of law for the opinion of this court :" 1. Whether, on the facts and the circumstances of the case, the Tribunal was justified in upholding the deletion of the addition of Rs. 1,56,195 being provision for purchase tax liability"

( 2 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the deletion of Rs. 15,444 on purchase tax liability and Rs. 47,624 as provision for sales tax ?

( 3 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the deletion of Rs. 1,08,281 representing unpaid wages and bonus for the accounting year 1974-75 written back to the profit and loss account for the relevant assessment year ?

( 4 ) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of allowing depreciation, the payment of 1,75,000 dollars to the Union Carbide International Co. Ltd. , of U. S. A. should be taken as part of the cost of machinery in respect of vertical lime kiln ?"2. The assessee, Jiajee Rao Cotton Mills Ltd. , is a resident company and the assessment year involved is 1979-80 for the previous year ended on March 31, 1979. The assessee-company carried on the business of manufacture of cotton textiles and synthetic fabrics. Besides, it has a chemical division styled as Saurashtra Chemicals at Porbandar in the State of Gujarat for the manufacture of soda ash, caustic soda and sodium bicarbonate. During the course of the assessment proceedings, the Income-tax Officer found that the assessee-company had provided a sum of Rs. 1,56,193 for purchase tax liability on account of Form No. "c" and Form No. 19 and Form No. "c" goods utilised for non-manufacturing purposes. The Revenue contended that since no demand was raised by the tax authority during the accounting period, as such, such a provision for tax liability was not permissible. It may be noticed that the assessee purchased goods without actual payment of taxes on the assumption that taxes were not payable on such purchase. The Income-tax Officer added this amount to the total income of the assessee only on the ground that the demand was neither raised nor quantified during the relevant period nor it was paid. The Income-tax Officer was of the further opinion that the goods were purchased by the assessee against the declaration forms that taxes are not payable on such purchases and further the assessee did not pay or write back such amount in the subsequent assessment years and as such there was no tax liability on the assessee and as such the assessee cannot be allowed to claim deduction. Under such circumstances, the Assessing Officer disallowed the deduction as claimed by the assessee. 3. On appeal the view taken by the Assessing Officer was set aside and the claim of deduction by the assessee was upheld. The Revenue took the matter to the Income-tax Tribunal in appeal but the Tribunal rejected the appeal. The Revenue thereafter got the matter referred to this court for opinion and that is how the matter has come up before us. 4. Since questions Nos. 1 and 2 are overlapping, we take up and answer these two questions together. On a perusal of the order of the Tribunal as well as the Commissioner of Income-tax it shows that the claim of the assessee for deduction was upheld on the ground that this matter is covered by a decision of the Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363. Learned counsel appearing for the Revenue, however, urged that the decision of the Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. [1971] 82 ITR 363, is not applicable in the present case as there was no liability on the part of the assessee to pay the purchase tax for the relevant assessment year. However,