V.V Kamat, J.:— Under section 256(2) of the Income-tax Act, 1961, the Revenue prays for a reference of the following six questions:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the disallowance of the sales tax amount of Rs. 1,80,203.?

2. Whether, on the facts and in the circumstances of the case and in the absence of a decision being rendered by the Commissioner of Income-tax (Appeals) in view of the chartered accountant of the assessee — not pressing ‘the point on principle’ before the Commissioner of Income-tax (Appeals)?

(i) does an appeal lie as against an issue conceded and not decided by the first appellate authority?

(ii) the Tribunal is right and with jurisdiction in deciding that point on merits?

(iii) should not the Tribunal have, if at all, remitted the case to the Commissioner of Income-tax (Appeals) to consider the point conceded by the chartered accountant before the Commissioner of Income-tax (Appeals) and hence not/could not be considered by the Commissioner of Income-tax (Appeals)?

3. Whether, on the facts and in the circumstances of the case and in the absence of a ground being raised before the Tribunal in accordance with law and procedure, the Tribunal is right in law in considering the ground conceded before the Commissioner of Income-tax (Appeals) based on the submissions (noted in paragraph 9) of the same chartered accountant who conceded before the Commissioner of Income-tax (Appeals) and in allowing the claim and are not the above procedure and decision, without jurisdiction, wrong, unreasonable and against law?

4. Whether, on the facts and in the circumstances of the case,—

(i) the Tribunal is right in law in considering the closing stock as a capital asset;

(ii) since section 45 deals with only capital assets, the Tribunal is right in applying section 45(4) to this case;

(iii) should not the Tribunal have held as held by the Supreme Court in A.L.A Firm's case, the difference is to be treated as a ‘trading receipt’ and assessed under the head ‘Business’ only?

5. Whether, on the facts and in the circumstances of the case and having found that section 45(4) would apply — though not correct — the Tribunal is right at all in rejecting the Revenue's prayer for direction, finding, that there is nothing on record to show that the market value of the assets are higher than the book value and is not the above finding and refusal to give direction as prayed for wrong since the very same finding that the market value of closing stock was more than the book value which was in the file and assessable under section 45(4) should have been the basis for the Tribunal to issue a direction to that effect?

6. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition to the closing stock?”

2. Since on hearing learned senior counsel and the learned advocate for the respondent-assessee — Messrs. Diza Electricals, we are inclined to exercise our powers only in regard to the following questions which are questions Nos. 1 and 6, respectively. We will advert briefly to the necessary narration.

3. The questions which we propose to direct are reproduced herein-below:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the disallowance of the sales tax amount of Rs. 1,80,203?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition to the closing stock?”

4. The assessee was a partnership firm. During the previous year ending on December 31, 1986, there was tax collection of Rs. 1,19,031 unpaid on the last date. It appears that in the assessment year 1987-88 this amount was disallowed under section 43B of the Income-tax Act as the same had not been paid during the previous year.

5. The factual material presents peculiarities. The firm continued business till January 12, 1987, and was dissolved on that date. The relevant assessment year in regard thereto would be 1988-89 when the firm functioned or carried on business only for 12 days. During this period sales tax was collected amounting to Rs. 61,272.

6. The factual peculiarities on dissolution further reveal that the assets and liabilities were taken over by Diza John Agencies (P.) Ltd., which was one of the partners of the assessee-firm.

7. The assessee-firm for the assessment year 1988-89 claimed deduction of the above amounts of Rs. 1,19,031 and Rs. 61,272 which was paid after dissolution, by Diza John Agencies Pvt. Ltd., as one of the partners of the dissolved firm claiming entitlement to deduction in regard thereto.

8. There was another question before the Assessing Officer regarding the valuation of the closing stock-in-trade. Relying on the decision of this court in Popular Automobiles v. Commissioner Of Income-Tax., [1989] 179 ITR 632 it was held that the closing stock-in-trade is to be valued at the market rate. The assessee was unable to furnish the market rate or price with regard to these each of the items, leaving the Assessing Officer to estimation. The Assessing Officer estimated the market rate or price by adding a gross profit of ten per cent, to the cost admitted and thereby ordered addition of Rs. 2,09,062. This was on the basis of the admitted position regarding the value of the stock by the assessee himself amounting to Rs. 20,90,627 on ten per cent, basis. The first appellate authority, the Commissioner of Income-tax (Appeals), found that Rs. 1,19,031 was also paid after the date of dissolution, January 12, 1987, and, therefore, there could be no question of allowing deduction in the year in question on actual payment basis. However, as regards Rs. 61,272, it is observed that since the liability was taken over by the purchasing company and discharged by it, it cannot be held that it was in fact paid by the assessee and therefore on the basis of this reasoning, it is held that there cannot be any deduction under section 43B of the Income-tax Act.

9. The appellate authority in regard to the question of valuation accepted the concession with regard to the position in principle that valuation has to be on the basis of market value and proceeded to consider to deal with the submission that the process of assessment in regard thereto by the assessing authority was leaning on the side of excess. The appellate authority reduced the amount of addition to Rs. 1,62,000.

10. It is in this situation that the two aspects came up for consideration before the Tribunal. Before the Tribunal it was submitted on behalf of the assessee that the sales tax liability is a statutory liability and has always continued to be his liability until it is discharged. It was further submitted that in spite of the firm having been dissolved on January 12, 1987, for the purpose of winding up it will have to be understood to have continued thereafter in view of the position of law in regard thereto.

11. Reliance was placed on section 21A(1), (3) as well as section 23(1) of the Kerala General Sales Tax Act, 1963. It was further submitted that the peculiar facts on record that on dissolution the private limited company which was itself a partner of the assessee-firm in question had taken over the assets and liabilities on the basis of what, is to be understood as a stated consideration have not been taken into consideration. It was further submitted that in spite of the dissolution of the assessee-firm, the liability for the payment of sales tax and as a result any payment in regard thereto by one of the erstwhile partners would have to be considered and viewed as a payment of sales tax by the firm itself. A further factual peculiarity was also brought on record by the submission that the remaining two partners of the assessee-firm on settlement of their accounts, it would be seen, had received their share after deducting the statutory liability. In this context as a corollary it was submitted that the fact and the date of dissolution January 12, 1987, would have to be understood as having been carried further to the calendar year which is the accounting year of the assessee-firm up to the end of December 31, 1987. It was also submitted that in view of the peculiarities it would have to be considered whether the authorities erred in taking the previous year comprising the period of 12 days from January 1, 1987, up to January 12, 1987, and it would also have to be considered as to whether the previous year should be understood as the one ending on December 31, 1987, by resort to the fiction of the provisions of law, of the Kerala General Sales Tax Act, 1963, the relevant provisions of the Income-tax Act, 1961, in relation to the statutory provisions of section 47 of the Indian Partnership Act, 1932.

12. These rival submissions would be required to be considered and in our judgment questions of law get spelt out.

13. With regard to the question of deduction, necessarily what is to be understood as the previous year in the context, whether the previous year would be from January 1, 1987 up to January 12, 1987, or whether it would be January 1, 1987, up to December 31, 1987, would be the determining position. Apart therefrom the question also will have to be considered in the light of the relevant statutory provisions, with regard to the effect of dissolution on the discharge of the liabilities of the partnership firm and also with regard to the factual basis when payments are made after the dissolution.

14. Another aspect which would be required to be considered would also be a situation of law. What is the process of valuation of the closing stock-in-trade as at the date of dissolution? Even in regard to this and in spite of the general principle in regard thereto to be found in the decision of the Supreme Court in A.L.A Firm v. Commissioner Of Income Tax, Madras, [1991] 189 ITR 285. The question will have to be considered in the light of the factual peculiarities. Even though the proposition that in the event of dissolution of the firm closing stock must be valued at market price only as the same would reveal taking the authority nearer to the ascertainment of the true profit, the question is of application. In regard to this also the reasoning is that this is not a case where the partners have revalued the stock at a higher figure for the purposes of settlement of their mutual claims admitting lesser value for income-tax purposes and thereafter on the basis of that resort to the process of pick and choose leading to the conclusion that the said process would not result in the correct ascertainment of the income of the firm will have to be considered because it is on the basis of the above reasoning it is observed that the decision of the Supreme Court in A.L.A Firn's case, [1991] 189 ITR 285 is taken out of its rigour.

15. In our judgment, the questions would require consideration at a fuller length with a proper statement of case.

16. It must be stated that with regard to other questions, like the assessee trying to argue a position of law apparently conceded by the chartered accountant (question No. 2), like the Tribunal taking up a ground for consideration which is apparently conceded before the first appellate authority (question No. 3). It cannot be said that a reference is called for in view of an established position that a concession on a question of law does not bind a party at any subsequent stage.

17. Similarly, with regard to questions Nos. 4 and 5, we find that they are nothing but facets of the questions of which we are directing reference, the questions framed herein and therefore do not require a separate reference in regard thereto.

18. For the above reasons, the Income-tax Appellate Tribunal is directed to refer the following two questions to this court after drawing the required statement of case in the light of our above observations within a period of three months from the receipt of a copy of this judgment and the record, which should be transmitted forthwith:

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the disallowance of the sales tax amount of Rs. 1,80,203?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition to the closing stock?”

19. A copy of this judgment under the seal of this court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders.