Judgment :- P.D.Dinakaran, J. This is a reference on a question of law raised under Section 256(2) of the Income-Tax Act, namely , "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the refund received by the assessee from the Central Excise Department cannot be taxed under section 41(1)of the Income-tax Act, 1961, especially when the same has been claimed and allowed as a deduction under Section 37 of the Income-tax Act ?" 2.1. The respondent assessee is a company. During the assessment year 1988-89, the respondent assessee received a refund of Rs.16,37,721/- as refund of excise duty. The assessee claimed this as a liability as this amount represents the liability to the stockists. The assessing officer assessed this amount as income under Section 41(1) of the Act, as the assessee had availed the deduction in the earlier years, when the money was paid to the Excise Department. 2.2. On appeal, the action of the assessing officer was confirmed by the CIT (Appeals). 2.3. On further appeal, the Tribunal has held that the refund of excise duty is not assessable under Section 41(1) of the Income Tax Act, following the decision of the Madhya Pradesh High Court in the case of COMMISSIONER OF INCOME TAX VS. DEORA PU CANBEON MFG.CO.PVT.LTD. (156 ITR 831) and the decision of the Madras High Court in the case of COMMISSIONER OF INCOME TAX VS. THIRUMALAI SWAMY NAIDU (147 ITR 657). Under such circumstances, the matter was referred on the above question of law to this Bench. 3. Heard. 4. It is not in dispute that both the decisions now referred to have been reversed by the Apex Court and the point on issue is substantially settled by the Apex Court in POLYFLEX (INDIA) PVT. LTD., BANGALORE VS. COMMISSIONER OF INCOME TAX, KAKRNATAKA ( 2002 (7) SCC 188 ) holding that the amount so refunded became income of the assessment year in question under deeming provision of Section 41(1) of the Income Tax Act and therefore taxable in that assessment year and the payment of statutory levy such as sales tax or excise duty in the course of carrying on business is, therefore, covered under Section 37 of the Act. 5. Hence, the question of law referred to us is answered in affirmative in favour of the Revenue and against the assessee. 6. 5. Hence, the question of law referred to us is answered in affirmative in favour of the Revenue and against the assessee. 6. However, since it is brought to our notice that the respondent assessee has already paid the tax in the subsequent year for the said amount of refund, which was attracted under Section 41(1) of the Act, even though the reference is now answered in favour of the Revenue, there shall be a direction to the Revenue that before taking any further action, they shall take notice of the fact that the respondent assessee has already paid the tax in the subsequent year for the amount refunded to them and the parties are at liberty to work out their rights in accordance with law.