1. The Income-tax Appellate Tribunal, Cochin Bench has referred the following question for decision of this Court under S.256 (1) of the Income-tax Act.

"Whether on the facts and circumstances of the case, Rs. 17,092/- being the amount paid by the assessee by way of arrears of tax under the Kerala Motor Vehicles (Taxation of Passengers & Goods) Act, 1963, relating to earlier years is to be allowed as a deduction in computing the assessee's income for the assessment year 1975-76?"

2. The Assessee is a firm carrying on business of passenger transport. The firm was constituted as per a deed of partnership dated 1-11-1959. Clause.11 of the partnership-deed provides for the accounts of the firm to be maintained on mercantile basis and its accounts are maintained accordingly.

3. The firm filed a return for the assessment year 1975-76 disclosing an income of Rs. 77,930.00. It had claimed deduction of Rs. 33,672.00 being the tax paid under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act 1963. The Income-tax Officer noticed that out of Rs. 33,672.00 paid during the accounting period a sum of Rs. 17, 091.72 related to tax payable during the earlier years. Accordingl