D. K. SEN, J. ( 1 ) NATHMAL Bhuwalka, the assessee, carried on business of running a colliery. It is not in dispute that in respect of the colliery. royalty was payable by the assessee to the State Government for every month by the 15th day of the next month, failing which interest at the rate of 12 per cent, per annum became payable on the amount of royalty in arrears by the assessee. ( 2 ) IN the assessment year 1970-71, the corresponding accounting period ending on the Ram Navami day, being some time in April of the year 1970-71, the assessee was assessed to income-tax. In its return, the assessee had claimed deduction of an amount of Rs. 25,000 which the assessee had provided for meeting the liability to pay interest to the State Government on account of its delay in payment of royalty. It is not in dispute that at the beginning of the accounting period, a substantial sum had become due from the assessee to the State Government on account of royalty apart from the monthly accrual of further liability on account of such royalty. The Income-tax Officer disallowed the deduction of the amount set apart on the ground that this was a mere provision. On an appeal, particulars of the arrears of royalty and the accrual of interest thereon in the relevant year were submitted before the Appellate Assistant Commissioner calculated at Rs. 30,010. The Appellate Assistant Commissioner held that the liability for payment of interest would arise in the hands of the assessee only on issue of a notice of a public demand raised by the Certificate Officer. Till such notice was issued, it could not be said that there was any liability to pay interest on outstanding royalty. The Appellate Assistant Commissioner confirmed the decision of the Income-tax Officer on the above ground. ( 3 ) ON further appeal before the Tribunal, the assessee filed particulars of the assessee's claim showing that up to March 31, 1970, i. e. , by the end of the relevant accounting year, a sum of Rs. 30,010 had become payable to the State Government towards interest on the arrears of royalty. The Tribunal noted that in the earlier assessment years, from 1967-68 to 1969-70, the same provision made by the assessee on this account had been allowed as a deduction. 30,010 had become payable to the State Government towards interest on the arrears of royalty. The Tribunal noted that in the earlier assessment years, from 1967-68 to 1969-70, the same provision made by the assessee on this account had been allowed as a deduction. The Tribunal held that the liability to pay interest to the State Government arose automatically on the date or dates of default of payment of royalty and continued up to the date of payment. The Tribunal, accordingly, held that deduction should have been allowed to the extent the provision was made by the assessee in its accounts for meeting the said liability which had accrued. The claim of the assessee was allowed. ( 4 ) ON an application of the Revenue under Section 256 (1) of the Income-tax Act, 1961 ("the Act"), the following question has been referred as a question of law arising out of the order of the Tribunal for the opinion of this court :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing as a deduction the liability to pay interest of Rs. 25,000 on arrears of royalty to the State Government on the ground that the said liability accrued automatically on the assessee's failure to pay the royalty by the due date and the said liability was not contingent upon the issue of a demand notice by the Certificate Officer?" ( 5 ) WE note that it is not disputed by the Revenue that interest would be payable to the State Government if royalty was not paid in time. In that view, deduction on account of such interest had been allowed to the assessee in the earlier assessment years. The conclusion of the Appellate Assistant Commissioner that such liability would only arise on the issue of a certificate under the Public Demands Recovery Act is not warranted. We agree with the conclusion of the Tribunal on this point. Both before the Appellate Assistant Commissioner and before the Tribunal, particulars of interest as accruing on the arrears of royalty during the relevant period had been given and on the basis thereof, the Tribunal was entitled to allow the assessee the deduction claimed which was little less than the amount of the interest which had actually accrued. Both before the Appellate Assistant Commissioner and before the Tribunal, particulars of interest as accruing on the arrears of royalty during the relevant period had been given and on the basis thereof, the Tribunal was entitled to allow the assessee the deduction claimed which was little less than the amount of the interest which had actually accrued. ( 6 ) FOR the reasons as above, we answer the question referred in the affirmative and in favour of the assessee. There will be no order as to costs. M. G. -