MANCHANDA, J. :- This is a case stated under Sec. 66 (1) of the Indian Income Tax Act. 1922, (hereinafter referred to as the Act). The Question referred is :

"Whether the sum of Rs. 27,167 debited by the assessee to the profit and loss account and credited to the sales tax account is an admissible deduction?"

1-a The material facts are these: The relevant assessment year is 1956-57, the year ending on 28th August, 1957. The assessee is a dealer in cloth both purchased locally and imported from outside. Uptill the 31st March, 1956, sales tax was charged by the Government of Uttar Pradesh on sales of cloth imported from outside Uttar, Pradesh at the rate of 3 pies to 6 pies per rupee On the 31st of March, 1956, the Govt. of Uttar Pradesh issued an Ordinance raising sales tax to one anna per rupee. This Ordinance was subsequently replaced by the U. P. Sales Tax (Amendment) Act, 1956, which purported to regularise the provisions of the said Ordinance. Subsequent to this the U. P. Sales Tax (Amendment) Act, 1957, was passed on 30th September 1957, the main purpose of which was to hold that the amendment brought by the U. P. Ordinance of 31st March, 1956, was valid on and from 31s