1 At the instance of the Revenue the following question has been referred to this Court for decision:
"Whether, on the facts and in the circumstances of the case and considering the mercantile system of accounting followed by the assessee and also considering the reopening of accounts is impermissible under Indian Law, the Tribunal is right in holding
i) the amount credited as the price of medicine supplied to Government does not represent accrued income or income received?
ii) entries made in accounts represent only mere claims?

2. Respondent assessee is a public sector undertaking of the Government of Kerala and the subsidiary of the Kerala State industrial Enterprises Ltd. It is engaged in the manufacture and sale of pharmaceutical products. We are concerned with the assessment year 1978-79 for which the corresponding previous year ended on 31-3-1978.

3. The entire productions of the assessee are supplied to the Health Services Department of Kerala Government. The Gove