1 to 8. [These paras are not reproduced here as they involve minor issues.]

9. The third and last question is about the allowance of sales-tax liabilities and foreign exchange penalty. The order of the AAC would show the following facts in regard to these liabilities:-

"Sales-tax liabilities (Assessment years 1969-70 to 1977-78) :

For assessment years 1969-70 to 1977-78, the appellant claimed a sum of Rs. 92,000, representing sales-tax liabilities, as deduction.

The WTO noticed that the Sales-tax arrears were being contested in appeal; and that, the appellant bad never been engaged in any sale of goods warranting payment of Sales-tax.

Further the appellant could not give details of break-up figure of these liabilities; she also did not produce any order or notice of demand in this regard.

Hence the WTO did not grant the deduction sought by the appellant.

The representative informed me that the Sales-tax authorities of the Government of Tamil Nadu proceeded against the firms- Soundammal Textiles, Bangalore Stores, OVEEKAY Textiles, and Balakrishna Textiles, in which the appellant was one of the partners-for alleged first sale of imported art silk yarn; that, these firms contended that they either sold away the import licences or used the yarn in their own manufacturing; that, such a plea of these firms was not accepted by the Sales-tax authorities; that, the decision of the Sales-tax authorities to levy Sales-tax on the alleged first sale of imported art silk yarn was confirmed on appeal by the Tribunal; that, these firms filed appeals against the decision of the Tribunal with the High Court of Madras; that, since no stay was obtained, the said Sales-taxes were now paid by the partners of these firms in small instalments; and that, the total Sales-tax payable had been claimed as a current liability by all the partners of these firms in their return of wealth.

Under these circumstances, the representative argued that the appellant was definitely entitled to for deduction of Sales-tax payable by her in respect of these firms."

The AAC came to the conclusion on these facts that the liability to sales-tax is not effaced merely because an appeal had been filed and he followed, though did not refer to it, the decision of the Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363.

10. We are unable to disagree with the AAC. As per the law now laid down by the Supreme Court in the above case, merely because an appeal has been filed against the liability, it does not mean that the liability under the statute did not arise or abated. We are, therefore, of the opinion that the liability to sales-tax did exist and had been correctly allowed as a deduction in computing the wealth of the assessee.

11. In so far as Foreign Exchange penalty is concerned, the facts stated in the order of the AAC are as under :-

"Foreign Exchange penalty (Assessment years 1969-70 to 1977-78):

For assessment years 1969-70 to 1977-78, the appellant claimed a sum of Rs. 2,20,000, representing Foreign Exchange penalty, as deduction.

The WTO noticed that the levy of Foreign Exchange penalty was being contested by the appellant in appeal.

The appellant also did not file full details about this penalty.

Hence the WTO did not grant deduction sought by the appellant.

At the time of hearing before me, the representative stated that the late Shri O.V. Krishnasamy Chettiar, his sons, and his family members were either partners or proprietors in six firms, viz., Jambi Agencies, Balakrishna Textiles, Oveekay Textiles, Kadiresan Yarn Stores, Soundammal Textiles and Bangalore Stores; that, all these firms were engaged in the export of textiles and handicrafts; that, all these firms by their export performance got licences and also advance licence for import of art silk yarn; that, the Directorate of Enforcement New Delhi proceeded against these firms for alleged violation of the provisions of Section 12(2) of the Foreign Exchange Regulation Act, 1947 and l