Mercantile accounting allows deduction of accrued sales tax liability; a settled issue need not be referred again.

Under the mercantile system of accounting, unpaid sales tax liability is deductible in the year the liability accrues, not only when it is actually paid or finally quantified. The High Court held that this principle had already been authoritatively settled by binding precedent, including earlier decisions of the same court and other High Courts. Because the proposed question was no longer debatable, the Tribunal could not be directed under section 256(2) of the Income-tax Act, 1961 to refer it. The reference petition was dismissed, and the assessee's allowance of the deduction remained undisturbed.

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Issues: Whether the Tribunal could be directed under section 256(2) of the Income-tax Act, 1961 to refer the question whether unpaid sales tax liability was deductible when no actual payment had been made during the relevant year.

Analysis: The question was already settled by binding precedent of the same High Court, which had reversed the earlier view relied upon by the assessing authority. The governing principle applied was that under the mercantile system of accounting, deduction is allowable in the year in which the liability accrues and not merely in the year when it is finally quantified or actually paid. The court also noted that the view was consistent with decisions of other High Courts.

Conclusion: The proposed question did not warrant a reference, as the issue stood authoritatively settled against the Revenue.

Final Conclusion: The petition for reference was dismissed, leaving the assessee's allowance of the sales tax liability undisturbed.

Ratio Decidendi: Under the mercantile system, a deduction is claimable when the liability accrues, and a question already authoritatively settled by binding precedent does not justify a reference.

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