These two appeals, one filed by assessee and other filed by Department, are directed against common order dt. 1st Oct., 1984 of CIT(A) relating to asst. yr. 1980-81, previous year of which ended on 31st Dec., 1979. Hence, they are heard together and disposed of by this common order for sake of convenience. assessee is limited company engaged in business of manufacture and sale of aluminium foils. We first take up assessee s appeal. At outset, Shri S. Dasgupta, ld. Representative for assessee, stated before us that he did not wish to press first ground in this appeal relating to t h e sum of Rs. 18,08,816 claimed as deduction towards sales tax liability. Hence, we find this ground against assessee. next ground in this appeal states that assessee s claim for deducting sum of Rs. 14,40,705 out of aforesaid amount of Rs. 18,08,816 should have been allowed. Shri S. Dasgupta explained before us that this amount representing additional demand covered by assessment orders received by assessee during previous year under appeal. assessee debited aforesaid sum of Rs. 18,08,816 to profit and loss account of year under consideration. assessee filed explanatory note before ITO explaining that it did not accept sale tax assessment relating to asst. yrs. 1970 to 1978. Appeals and Stay Petitions were pending before sales tax authorities. ITO held that Sales tax liability did not arise during calendar year 1979 which is under consideration. Since assessee was following mercantile system of accounting, ITO disallowed claim of assessee as not relating to previous year under consideration. assessee appealed to CIT(A) and contended that claim of assessee should have been allowed. CIT(A) rejected claim of assessee relying on decision in case of Kedarnath Jute Mft. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) and CIT vs. V. Krishnan (1979) 12 CTR (Mad) 371: (1980) 121 ITR 859 (Mad). Shri S. Dasgupta, urged before us that assessee s alternative claim to allow portion of Rs. 18,08,816 amounting to Rs. 14,40,705 should have been allowed as demand notice relating to that amount along with assessment orders were received during calendar year 1979. We wanted to verify this fact from record. Shri S. Dasgupta took us through assessment order, order of CIT(A) as well as instructions given by IAC under s. 144B of IT Act, 1961 but could not find any finding of effect that assessment orders and demand notices to tune of Rs. 14,40,705 were in fact received during previous year under consideration. At that staged, he urged that assessee should be given chance to provide this fact especially when ground to that effect was taken before CIT(A) in Ground No. 11(b) which has not been specifically adjudicated upon by CIT(A). He stated that in case demand was, in fact, received during prevision year under consideration, assessee would be entitled to deduction to that extent in view of he following decisions: (1) Kedarnath Jute Mft. Co. Ltd. (supra) which approved decision in case of Pope King Match Factory vs. CIT (1963) 50 ITR 495 (Mad). In this case at page 366 Supreme Court states "In Pope King Match Factory vs. CIT, demand for excise duty was served on assessee and though he was objecting to it and seeking to get order of Collector of Excise reversed, he debited that amount in his accounts ........The Madras High Court had no difficulty in holding assessee had incurred enforceable legal liability......In our judgement, above decision lays down law correctly." (2) CIT vs. Royal Boot House (1970) 75 ITR 507 (Cal). At p. 511, Calcutta High Court observed "The dealer is obliged to pay sales tax according to his own calculation on all sales....If, however, tax authorities are not satisfied with that return, further liability can be imposed upon dealer by assessment. It is true that further liability does not accrue until assessment, but liability on sales in its un assessed staged appearing on face of sales tax returns filed by dealer arises on sales being effected." (3) CIT vs. Nathmal Tolaram (1973) 88 ITR 234 (Gau). In this case assessee did not make any provision for payment of sales tax in respect of sale effected in 1949-50. Demand for sale tax was made in accounting year 1957-58. assessee made debit entry in its account in that year and claimed it as business expenditure. Gauhati High Court held that claim of assessee was allowable on ground that there is no legal bar for doing so. (4) CIT vs. Central Province Manganese Ore Co. Ltd. (1978) 112 ITR 734 (Bom). In this case, assessee made claim to deduct amount demanded from assessee as additional export duty for earlier year. Revenue authorities disallowed claim on ground that he additional demand was not accepted by assessee nor was paid by it. Tribunal allowed claim of assessee relying on Kedarnath Jute Mfg. Co. Ltd. (supra). Bombay High Court confirmed decision of Tribunal. (5) ITAT vs. B. Hill Co. (P) Ltd. (1981) 29 CTR (All) 301: (1983) 142 ITR 185 (All). In this case, assessee received show-cause notice as to why it should not be held to be liable for sales tax for its activities which it made in earlier years. assessee made provision for liability attributable to show-cause notice and made claim for deducting same while computing its business income. claim of assessee was disallowed by Revenue authorities on ground that it was mere contingent liability. Tribunal affirmed action of Revenue authorities o ground that liability to sales tax accrued as soon as sales were effected which was earlier to relevant previous year. Allahabad High Court allowed claim of assessee on ground that sales tax liability could not be said be contingent liability simple because it was being disputed by assessee. (6) Addl. CIT v. Rattan Chand Kapoor (1984) 43 CTR (Del) 283: (1984) 149 ITR 1 (Del): In this case demand notice for sales tax relating to earlier years was received in particular previous year. assessee claimed deduction in year on ground that notice of demand was received during that year. Delhi Court held that assessee was entitled to deduction because assessee could not have made any entry in books nor could have made any claim before ITO prior to receipt of demand notice. In this case High Court held that assessee had adopted hybrid system of accounting which was open to him and hence amount was deductible on principal of accountancy followed by assessee. Shri S. K. Jha, ld. Representative for Department, on other hand, supported order of CIT(A). He stated that point of time at which liability for expense accrues has been considered by Supreme Court in case of Calcutta Co. Ltd. vs. CIT (1959) 37 ITR 1 (SC). principles laid down in that case were later elaborated by Supreme Court in case of Kedarnath Jute Mfg. (supra). According to him, Supreme Court has clearly laid down law to effect that liability to pay sales tax arises when sale is effected. It makes no difference to time of accrual of liability even if assessee was disputing liability or did not make any entry in its books of account. He urged that facts in Pope King Match Factory (supra) were different inasmuch sales were effected in that case during previous year in which liability was allowed. In Kedarnath Jute Mfg. (supra), Supreme Court approved decision in Pope King Match Factory to extent it held that liability which has accrued cannot be denied as deduction merely because assessee was trying to reduce or waive liability. Hence, he urged that said decision is of no help to assessee. Next, he referred to decision of Patna High Court in case of CIT vs. Sheo Kumar Debi (1986) 50 CTR (Pat) 350: (1986) 157 ITR 13 (Pat) for proposition that judgment has to be read as whole in order to find out its true ratio. reading of sentence here and another sentence there from judgment will not necessarily lead to true ratio of judgment. Neither every observations found in judgment nor what logically follows from various observations made in it constitutes ratio of judgment. Hence, he urged that reference made by Shri S. Dasgupta in disconnected sentences from this judgment and that does not help case of assessee as in every case true ratio, is important. Next he referred to decision in case of CIT vs. Brijmohan Das Laxman Dass (1979) 11 CTR (All) 243: (1979) 117 ITR 121 (All), in this case, Allahabad High Court held that sales tax liability of one year cannot be claimed as deduction in subsequent year on ground that sales tax assessment was completed in subsequent year. If assessee was following mercantile system of accounting. Finally, he referred to decision in case of V. Krishnan (supra). In this case, assessee did not make any provision for sales tax liability for earlier years. In subsequent year sales tax authority raised demand relating to those earlier years. assessee s claim for deduction of liability in later years was rejected by Revenue authorities as well as Madras High Court. High Court observed that liability to sales tax ordinarily relates to year in which transaction takes place. No other year is relevant. Madras High Court differed from Nathmal Tolaram (supra) and applied Kedarnath Jute Mfg. Co. Ltd. (supra). We have considered contentions of both parties as well as facts on record. At outset, we wish to record undisputed fact that nobody has verified as to whether sum of Rs. 14,40,705 which represented liability for sales tax of earlier years was actually demanded by sales tax authorities during previous year under consideration. Normally, we would have asked Revenue authorities of verify this fact provided such verification would have been meaningful. In other words, if we come to conclusion that amount under consideration is admissible as deduction if demand notice was received during previous year under consideration, then we would have followed aforesaid course with appropriate direction. However, in our considered opinion, claim of assessee is not admissible as deduction while computing business income of previous year under consideration under mercantile system of accounting even though aforesaid amount is assumed to have been demanded during previous year under consideration. We have come to this conclusion primarily because of decision of Supreme Court in case of Kedarnath Jute Mfg. Co. (supra). It is true that in case Supreme Court has approved decision of Madras High Court in case of Pope King Match Factory (supra). However, on going through said Madras decision, we find that sales were effected during relevant previous year and so liability for sales tax of those sales was allowed notwithstanding dispute raised by assessee. It is this aspect of Madras case that was approved by Supreme Court. Hence, it is not correct to say that said case is authority for proposition that liability to sales tax can be deferred to year subsequent to year of sale merely on ground that demand for sales tax or additional tax over amount unprovided by assessee was raised in subsequent year. We have gone through decision of Calcutta High Court in case of Royal Boot House (supra), but we find that this decision was given prior to decision of Supreme Court in case of Kedarnath Jute Mfg. (supra). It is true that some of High Courts, as stated above, appear to support case of assessee. However, on closer examination, we find that each of those cases was decided in favour of assessee in peculiar facts and circumstances of those cases which are clearly distinguishable from facts of case before us. In this case, assessee effected sales in earlier years and made provisions for sales tax on those sales, but on lower figure. Later, sales tax authorities raised demand for correct amount under law. On authority of Kedarnath Jute Mfg. (supra), it can be said that this extra demand related back to year of sale and could not be connected with previous year under consideration in view of mercantile system of accounting followed by assessee. On contrary, there are two decision in favour of Revenue, viz. (1) V. Krishnan (supra) and (2) Brijmohan Das Laxman Das (supra). With great respect, we are inclined to follow these two decision as well as Kedarnath Jute Mfg. (supra), which in our opinion, supports case of Revenue in case before us. Hence, we uphold order of CIT(A) on this point and reject this ground. next ground in this appeal states that CIT(A) was not justified in disallowing claim of assessee for deducting sum of Rs. 82,14,425 representing excise duty liability of earlier year which became ascertained in relevant previous year. assessee claimed following three items relating to excise duty: (1) Demand notice dt. 3-8-1979 (1) Demand notice dt. 3-8-1979 Rs. 2,57,304 (2) Demand notice dt. 20-9-1979 Rs. 56,84,425 (3) Estimated liability not covered by demand notice Rs. 25,30,000 case of assessee was that it was not liable to excise duty. It moved High Court who passed interim order restraining Central Excise authorities to realise duty. By Notification dt. 13th Dec., 1980, Government exempted aluminium foils from payment of duty if they are made for export. This exemption became effective from 5th Jan., 1981 i.e. subsequent to previous year under consideration. ITO disallowed claim of assessee on ground that excise duty related to period prior to previous year under consideration and so same was not allowable under mercantile system of accounting. On appeal, CIT(A) found that sum of Rs. 2,57,304 was referable to clearance of goods made during previous year under consideration. Hence, statutory liability to pay duty thereon arose during said year notwithstanding fact that assessee was disputing its liability. Hence, relying on decision in case of Kedarnath Jute Mfg. (supra), he directed to allow sum of Rs. 2,57,304 as deduction. However, so far as other two items are concerned, he did not find any case in favour of assessee. Those demands related to period prior to previous year under consideration. Hence, relying on decision in case of V. Krishnon (supra), he disallowed those two amounts. assessee has come up in appeal before us against two amounts disallowed while Department has come up in appeal against sum of Rs. 2,57,304 allowed CIT(A). Shri S. Dasgupta, urged before us that claim of assessee should have been allowed. he relied in this connection on decision in case of CIT vs. Rajeshwari Distributors (P) Ltd. (1980) 16 CTR (Cal) 394: (1980) 125 ITR 618 (Cal). This was case of sales tax by subsequent Notification, assessee was made liable to pay sales tax for transactions made in earlier year. assessee s claim for deducting sales tax on basis of Notification was allowed by Calcutta High Court as admissible deduction. He also referred to decision in case of CIT vs. Century Enka Ltd. (1981) 130 ITR 267 (Cal). In this case provision for excise duty was allowed as deduction, though no demand notice for duty was issued. Shri. S. K. Jha, on other hand, supported disallowance on ground recorded by Revenue authorities. Further, he urged that assessee had obtained Stay from High Court in its Constitutional jurisdiction and so Excise Duty Act should be treated as eclipsed during period of Stay granted by High Court. Consequently, it was not statutory liability. As assessee was not accepting this liability it could not be allowed as legally enforceable debt. We have considered contentions of both parties as well as facts on record. As held in case of Kedarnath Jute Mfg. (supra), statutory liability to pay duty arises on happening of event attracting levy of duty. There is no dispute about fact that clearance in respect of which sum of Rs. 21,57,304 was levied as duty was made during previous year under consideration. Hence, we hold that this amount has been rightly allowed by CIT(A) as deductible while computing business income of assessee under consideration. However, regarding two other items, there is n nexus between those expenses and previous year under consideration. It cannot be said that those liabilities accrued during year under consideration because clearance of manufactured products occurred long before previous year under consideration. In case of Rajeshwari Distributors (P) Ltd. (supra), Notification levying fresh statutory liability was issued during previous year and so additional amount was allowed. In case of Century Enka (P) Ltd. (supra), assessee manufactured certain products and itself utilised same during previous year under consideration. Court held that in such case excise duty is allowable as event giving rise to statutory liability happened during previous year. facts of case before us are entirely different. Hence, we uphold decision of CIT(A) on both points viz., allowance of Rs. 2,57,304 and disallowance of balance of Rs. 82,14,425. only other ground in this assessee s appeal states that assessee s claim to deduct sur-tax liability while computing its income under IT Act should have been allowed. We find that this issue is covered against assessee by decision in case of Molins of India Ltd. vs. CIT (1983) 35 CTR (Cal) 254: (1983) 144 ITR 317 (Cal). Respectfully following aforesaid decision, we uphold order of CIT(A) on this point and reject this ground. Now we come to Departmental appeal. We have already disposed of only ground taken in this appeal in favour of assessee. Hence, we reject this ground. In result, both appeal are dismissed. *** INDIA FOILS LIMITED v. INCOME TAX OFFICER