Judgment Ajit K. Sengupta, J. 1. IN this reference under Section 256(2) of the INcome-tax Act, 1961, for the assessment year 1975-76, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that sales tax liability of rupees one lakh five thousand and three hundred and ten only pertaining to the previous year ended December 31, 1970, arose when the demand notice was received in 1974 and was deductible in accounting the total income for the assessment year 1975-76." 2. SHORTLY stated, the facts leading to this reference are that the assessee claimed deduction of Rs. 2,21,386 during the year under appeal being liability for sales tax pertaining to the accounting years ending December 31, 1970, and December 31, 1971. The assessee's case before the Income-tax Officer was that it came to know for the first time on December 14, 1974, that it was under an obligation to pay sales tax on the goods imported for supply of the same to the Director-General of Supplies and Disposals which are specifically excluded as per terms and conditions contained in the schedule for acceptance of tenders for supply of those goods to the Director-General of Supplies and Disposals. The Income-tax Officer found from the Sales Tax Officer's order that the assessee, under a wrong impression that its case was covered by the decision of the Supreme Court in the case of K. G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473, did not pay sales tax within the years in which sales were effected. He further found that the assessee was to pay the sales tax within the respective accounting periods in view of the later decision of the Supreme Court in the case of Binani Bros. (P.) Ltd. [1974] 33 STC 254. He, therefore, came to hold that the assessee's liability to pay sales tax accrued within the respective years of sale and as such, its claim for deduction of Rs. 2,21,386 was not allowable during the assessment year under appeal, the accounting period for which began much later than the years in which sales were effected. He, therefore, came to hold that the assessee's liability to pay sales tax accrued within the respective years of sale and as such, its claim for deduction of Rs. 2,21,386 was not allowable during the assessment year under appeal, the accounting period for which began much later than the years in which sales were effected. On appeal, the Appellate Assistant Commissioner found that the assessee's tender for supply of hydraulic buffer oil and lubricating oils was accepted by the Director-General of Supplies and Disposals with the following conditions : "Prices are exclusive of sales tax, but as the sales are being made through import of finished products, no sales tax is leviable in this case." 3. THE Appellate Assistant Commissioner also found that the earlier decison of the Supreme Court in the case of K. G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473, was in favour of the assessee. THE Appellate Assistant Commissioner, therefore, came to hold that the assessee's liability to pay sales tax arose at the point of time when tax was demanded by the Sales Tax Officer by issue of notices. He, however, found that a sum of Rs. 1,05,310 being sales tax for the accounting period ending December 31, 1970, was demanded by issue of notice dated December 14, 1974, and the amount of Rs. 1,16,076 being tax for the accounting period ending December 31, 1971, was demanded by notice dated November 4, 1975. Hence, the Appellate Assistant Commissioner allowed the assessee's claim for deduction to the extent of Rs. 1,05,310 only which was demanded during the previous year relevant to the assessment year under consideration. Being aggrieved with the order of the Appellate Assistant Commissioner disallowing its claim of Rs. 1,16,076, the assessee filed an appeal before the Tribunal. THE Department also, being dissatisfied with the order of the Appellate Assistant Commissioner allowing the assessee's cliam for deduction to the extent of Rs. 1,05,310, filed an appeal before the Tribunal. 4. THE Tribunal, after considering the submissions of the parties, held that the law regarding the payment of sales tax on the products in question remained unsettled even before the judgment of the Supreme Court in the case of Binani Bros. 1,05,310, filed an appeal before the Tribunal. 4. THE Tribunal, after considering the submissions of the parties, held that the law regarding the payment of sales tax on the products in question remained unsettled even before the judgment of the Supreme Court in the case of Binani Bros. (P.) Ltd. [1974] 33 STC 254, and so the liability of the assessee to pay sales tax arose as and when the demand notices were received by the assessee and, accordingly, the Appellate Assistant Commissioner was justified in allowing the assessee's claim for deduction of the sum of Rs. 1,05,310 which was demanded by the Sales Tax Officer. At the hearing before us, the same contentions have been reiterated. We have already extracted the conditions of sale of hydraulic buffer oil and lubricating oils. The Director-General of Supplies and Disposals accepted the condition on which the sale was effected that the price would be exclusive of sales tax but as the sales are being made through import of finished products, no sales tax is leviable in this case. On this understanding, the assessee did not pay sales tax although the liability to pay sales tax arises as soon as sale is effected. It is not one of those cases where, admittedly, sales tax is payable but it was not paid although liability accrued. Hence, the supplier as well as the purchaser proceeded on the footing that no sales tax was leviable on the items in question. It was after the judgment of the Supreme Court in the case of K. G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473, that the question of imposition of sales tax arose. There the question was whether the sales by the assessee to the Government departments were in the course of import and exempt from taxation under Section 5(2) of the Central Sales Tax Act, 1956. 5. IT was held that the sales were exempt from taxation as the sales took place in the course of import of goods under Section 5(2) of the Act. 6. THIS decision held the field until the decision in the case of Binani Bros. (P.) Ltd. v. Union of India, was rendered. 5. IT was held that the sales were exempt from taxation as the sales took place in the course of import of goods under Section 5(2) of the Act. 6. THIS decision held the field until the decision in the case of Binani Bros. (P.) Ltd. v. Union of India, was rendered. There, the Bench of five judges held that the sales by the petitioner to the Director-General of Supplies and Disposals did not occasion the import of the goods, but it was the purchases made by the petitioner from the foreign sellers which occasioned the import of the goods. There was no privity of contract between the Director-General of Supplies and Disposals and the foreign sellers who did not enter into any contract by themselves or through the agency of the petitioner with the Director-General of Supplies and Disposals and the movement of goods from the foreign countries was not occasioned on account of the sales by the petitioner to the Director-General of Supplies and Disposals and that though, under the contract, the Director-General of Supplies and Disposals undertook to provide all facilities for the import of the goods for fulfilling the contracts including an Import Recommendation Certificate, there was no absolute obligation on the Director-General of Supplies and Disposals to procure these facilities. It was the obligation of the petitioner to obtain the import licence. Therefore, even if the contracts envisaged the import of goods and their supply to the Director-General of Supplies and Disposals from out of the goods imported, it did not follow that the movement of the goods in the course of import was occasioned by the contracts of sale by the petitioner with the Director-General of Supplies and Disposals. 7. IT is after the judgment of the Supreme Court in Binani Bros, (P.) Ltd. [1974] 33 STC 254 that the assessee was served with the demand notice during the relevant previous year. 8. OUR attention has been drawn to a decision of the Division Bench of this court in the case of CIT v. Teesta Valley Co. Ltd. [1991] 187 ITR 657, where this court held that the liability in such a case accrues only when the liability becomes real and enforceable. 8. OUR attention has been drawn to a decision of the Division Bench of this court in the case of CIT v. Teesta Valley Co. Ltd. [1991] 187 ITR 657, where this court held that the liability in such a case accrues only when the liability becomes real and enforceable. In the instant case, the liability accrued and arose and became real and enforceable in the previous year under reference when the demand notice was served by the Commercial Tax Officer demanding the sum of Rs. 1,05,310. In our view, therefore, on the facts and in the circumstances of the case and having regard to the principles laid down, the Tribunal came to a correct conclusion. We, therefore, answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs.