1. In this Income tax Reference under S. 66(1) of the Indian Income - tax Act, the Tribunal referred the following question for determination by this Court :
"Whether, on the facts and circumstances of the case, the amount of Rs. 1,49,776 which was claimed by the assessee as a deduction on account of sales - tax was deductible as a business expense ?"

2. The facts giving rise to this question may be set out briefly. The assessee is the Kedarnath Jute Manufacturing Co Ltd. of 13 Syed Sally Lane, Calcutta. It is a public limited company doing business in jute and jute goods manufacturing. The relevant previous year ended on the 31st December 1954. It followed the mercantile system of accounting. For the assessment year the assessee revised his return by claiming a reduction of Rs. 1,49,776 on account of sales tax determined to be payable on the sales account during the relevant accounting year.
2. The assessee's total sales during the year amounted to Rs. 71,01,566. The assessee disclosed a total turn over of Rs. 70,99,928 in its sales tax return for the period ending on the 31st December, 1954. The Sales - tax Act provided for exemptions in respect of sales made to registered dealers a