The payment of taxes is for the purpose of business, even though the payment may not be allowable as a deduction under the Act.

( 1 ) THIS reference arises out of an assessment for the year 1967-68 under Section 256 (1) of the I. T. Act, 1961, and the following question has been referred to this court:"whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the short-term and fixed bank deposits could not be included in the capital computation for the purpose of working out relief under Section 84 of the Income-tax Act, 1961, as it then stood, read with Rule 19 (4) of the Income-tax Rules, 1962 ?"

( 2 ) THE assessee is a limited company. For this assessment year one of the claims of the assessee-company was that the bank deposits should not be excluded from the capital computation for the purpose of working out the exemption under Section 84 of the I. T. Act, 1961, as it then stood. The ITO however, among other claims also, did not accept this claim. The assessee-company, being aggrieved by the aforesaid decision of the ITO, went up in appeal before the AAC. The AAC while giving relief on some other points, however, held that the short-term and fixed deposits in the bank should not have been excluded in making the capital computation for the purpose of determining the relief under Section 84 and partly allowed the assessee's appeal.

( 3 ) THE revenue being aggrieved by the order of the AAC went up in appeal before the Appellate Tribunal. It appears that there was a difference of opinion between the Accountant Member and the Judicial Member on the issue whether the short-term and fixed bank deposits could be included in the capital computation for the purpose of working out relief under Section 84 of the Act as it stood at the relevant time. The President of the Tribunal was, thereafter, moved to refer the case for hearing by one or more members of the Appellate Tribunal as required under Section 255 (4) of the Act on the following points of difference :"whether, on the facts and in the circumstances of the case, the bank deposits should be left out of account in the computation of capital for the purpose of working out the relief under Section 84 of the Act, as it then stood, read with Rule 19 (4) of the Income-tax Rules, 1962?"

( 4 ) THE President, in his turn, referred the matter to the Vice-President, who agreed with the view of the Accountant Member. We shall have to refer to the relevant portion of the finding by the learned Judicial Member, the Accountant Member as well as the Vice-president. Following the majority decision, however, the Appellate Tribunal Bench held that the short-term and fixed bank deposits could not be included in the capital computation for the purpose of working out the relief under Section 84 as it then stood. On these facts the aforesaid question as indicated above has been referred to this court. As we have mentioned before, the question arises in the context of Section 84 of the I. T. Act, 1961. Section 84, which was there for the relevant assessment year, provided, inter alia, that save as otherwise provided therein, income-tax shall not be payable by an assessee on so much of the profits and gains derived from an industrial undertaking or business or hotel to which the said Section applied as did not exceed 6% per annum on the capital employed in such undertaking or business. Sub- Section (2) of Section 84 deals with certain conditions to be fulfilled in order to be entitled to relief, in the prescribed manner. Sub-section (2) of Section 84 dealt with the conditions which were required to be fulfilled in order to be eligible for this benefit. There is no dispute in this case that such condi- tions required by Sub-section (2) were fulfilled. We have mentioned before that 6% per annum of the capital employed in such undertaking had to be computed in the manner prescribed. Now, the manner had been prescribed by Rule 19 of the I. T. Rules, 1962. Rule 19 deals with the computation of capital employed in industrial undertaking or hotel. Sub-r