Judgment :- K. A. THANIKKACHALAM, J. In pursuance of the direction given by this court in T. C. P. No. 46 of 1978, dated June 14, 1982, the Tribunal referred the following question, for the opinion of this court, under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that despite the Central Act 28 of 1969 and Madras Act 3 of 1969 there was a remission or cessation of liability under section 41(1) of the Income-tax Act, 1961?" * The assessee is a private limited company carrying on business in manufacturing safety matches. The assessment year involved in this tax case is 1972-73 for which the relevant previous year ended on March 31, 1972. In respect of sales effected by the assessee during the accounting years, relevant to the assessment years 1957-58 to 1965-66, the assessee paid Rs. 1, 37, 041 by way of Central sales tax. The Income-tax Officer gave deduction for this amount in the assessment for the relevant assessment years. The assessee had filed a writ petition before this court challenging the validity of the above levy and also inclusion of excise duty in the turnover for sales tax purposes. By judgment dated January 31, 1968, this court held that the levy is invalid and ordered refund of the sales tax paid. On December 31, 1968, an Ordinance was passed validating the levy of sales tax The levy was validated by the Ordinance dated December 31, 1968. Therefore, this court directed the refund of the entire amount collected by way of sales tax. The sum of Rs. 1, 37, 041 was refunded to the assessee on May 14, 1971. The Income-tax Officer treated this receipt as a trading receipt coming under section 41(1) of the Income-tax Act, 1961, and brought it to tax for the assessment year 1972-73. Since the High Court had invalidated the sales tax legislation by its judgment, dated January 31, 1968, protective action for the assessment year 1968-69 was also taken, taking the same amount under section 41(1) of the Act in that year. The Appellate Assistant Commissioner, on appeal, deleted the above amount. Since the High Court had invalidated the sales tax legislation by its judgment, dated January 31, 1968, protective action for the assessment year 1968-69 was also taken, taking the same amount under section 41(1) of the Act in that year. The Appellate Assistant Commissioner, on appeal, deleted the above amount. When the matter regarding the above came up on appeal before the Tribunal, the assessee submitted by a letter dated February 2, 1974, that the sales tax authorities had called upon the assessee to repay the sum of Rs. 1, 37, 041 to the Government. The Tribunal wanted the assessee to produce the details of the demand and his reply thereto. In fact, even in 1977, the alleged refund has not been paid back into the treasury or collected by the sales tax authorities. The assessee was not able to produce a receipt showing repayment. The Tribunal held that all the conditions of section 41(1) of the Act were satisfied and the refunded amount was taxable for the assessment year 1972-73. The Tribunal also negatived the contention of the Department that the assessee was entitled to the refund on the date the High Court delivered its judgment, invalidating the sales tax levy, i.e., on January 31, 1968, and so the amount of Rs. 1, 37, 041 was assessable for the assessment year 1968-69. The Tribunal directed that hence the protective assessment for the assessment year 1968-69 should be cancelledBefore us, learned counsel appearing for the assessee submitted that as against the Ordinance, validating the levy, the assessee went on appeal before the Supreme Court in Civil Appeal No. 2206 of 1982 wherein the Supreme Court, by judgment dated April 16, 1996, Comorin Match Industries (P.) Ltd. v. State of Tamil Nadu 1996 AIR(SC) 1916, 1996 (4) AD(SC) 11, 1996 (5) JT 167 , 1996 (102) STC 1 , 1996 (4) Supreme 23 , 1996 (3) Scale 538 , 1996 (4) SCC 281, dismissed the civil appeal filed by the assessee. Therefore, still there is liability to pay the sales tax. Hence, learned counsel appearing for the assessee submitted that inasmuch as the liability on the part of the assessee to pay sales tax is existing, it cannot be said that the amount of Rs. 1, 37, 041 can be treated as trading receipt, and, therefore, taxable under section 41(1) of the Act. Hence, learned counsel appearing for the assessee submitted that inasmuch as the liability on the part of the assessee to pay sales tax is existing, it cannot be said that the amount of Rs. 1, 37, 041 can be treated as trading receipt, and, therefore, taxable under section 41(1) of the Act. On the other hand, learned senior standing counsel appearing for the Department submitted that inasmuch as the refunded amount is in the hands of the assessee, which was not refunded till now, the assessee is liable to pay tax thereon We have heard both learned counsel appearing for the assessee as well as learned senior counsel appearing for the Department. The fact remains that originally sales tax was levied. The assessee collected the sales tax and paid it to the Government. Thereafter, the assessee filed proceedings before this court wherein the levy was held to be invalid. On account of that the sales tax paid was refunded to the assessee Subsequently, by an Ordinance, the Government revalidated the levy thereby fastening the liability on the assessee to pay the sales tax. As against this, the assessee went in appeal before the Supreme Court by filing Civil Appeal No. 2206 of 1982. In the said appeal, the Supreme Court upheld the Ordinance and dismissed the appeal filed by the assessee. The judgment is dated April 16, 1996 (Comorin Match Industries (Pvt.) Ltd. v. State of Tamil Nadu 1996 AIR(SC) 1916, 1996 (4) AD(SC) 11, 1996 (5) JT 167 , 1996 (102) STC 1 , 1996 (4) Supreme 23 , 1996 (3) Scale 538 , 1996 (4) SCC 281). A similar question came up for consideration before this court in T. C. Nos. 291 to 293 of 1976 in the case of CIT v. Mohideen Match Works. According to the facts arising in that case, the assessee filed writ petitions for issue of a writ of mandamus to refund the tax collected from the assessee. The refund was ordered. The Department contended that the amounts refunded will be liable to be taxed under section 41(1) of the Act. In the meanwhile by the Central Act 28 of 1969, the levy was validated, as against which suits were filed by the assessees. The suits were dismissed. Appeals were filed before the High Court. The appeals were also dismissed. The Department contended that the amounts refunded will be liable to be taxed under section 41(1) of the Act. In the meanwhile by the Central Act 28 of 1969, the levy was validated, as against which suits were filed by the assessees. The suits were dismissed. Appeals were filed before the High Court. The appeals were also dismissed. Therefore, this court held that section 41(1) of the Act will not be applicable to the facts of this case. However, a direction was given to the Income-tax Officer to tax the same if the assessee succeeded in the Supreme Court in the appeal filed by them In CIT v. Thirumalaiswamy Naidu and Sons 1984 (147) ITR 657, this court held that the refund received by the assessee from the sales tax Department was not a payment receivable by the assessee in its trading transaction, but was received purely in a fiscal transaction. There was no business relationship of any kind between the assessee and the sales tax department in the refund granted. Section 41(1) of the Act could not, therefore, be invoked to assess the sales tax refund. Nor could it be brought to tax de hors this section under any other valid principle of taxation of income Similarly, the Madhya Pradesh High Court in CIT v. Deora Pu Canbeon Mfg. Co. (P.) Ltd. 1985 (156) ITR 831, 1985 (47) CTR 324, 1987 (30) TAXMAN 612, 1986 (2) TLR 222, 1985 (47) CTR(MP) 324 held that the conclusion arrived at by the Tribunal that the amount belonged to the Madhya Pradesh Electricity Board was based on the material on record and on the interpretation of the agreement between the assessee and the Electricity Board and this was a finding of fact. There was no finding that the Electricity Board had given up its claim to this money. The amount was not, therefore, assessable as a trading receipt in the hands of the assesseeA combined reading of the decisions cited supra would go to show that refund of sales tax in the hands of the assessee herein is liable to be paid back on account of the subsequent Ordinance passed by the Government, validating the levy of sales tax, especially when the assessee lost its case before the Supreme Court. Inasmuch as still the liability is existing for payment of sales tax, section 41(1) of the Act cannot be made applicable to the facts of this case. Therefore, the Tribunal was not correct in coming to the conclusion that the sales tax refund in the hands of the assessee is taxable under section 41(1) of the Income-tax Act, 1961. Accordingly, we answer the question referred to us in the negative and in favour of the assessee. No costs.