Bad debt claim as factual finding: High Court rejected reference after holding no question of law arose.

In proceedings under Section 256(2) of the Income-tax Act, the Madhya Pradesh High Court treated the Tribunal's finding that the disputed amount was an irrecoverable debt, and not an investment transaction, as a finding of fact. The Tribunal had noted that the debtor company had taken a loan from the assessee and that the related interest had been treated as income in the relevant previous year. On that basis, the Court held that no question of law arose from the admissibility of the bad debt claim, so reference under Section 256(2) was not warranted and the request for reference was rejected.

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Issues: Whether, in proceedings under Section 256(2) of the Income-tax Act, 1961, a question of law arose from the Tribunal's finding that the disputed amount represented an irrecoverable debt and not an investment transaction.

Analysis: The Tribunal had recorded that the transaction was not in the nature of investment, that the debtor company had taken a loan from the assessee, and that the interest on the loan had been treated as income in the relevant previous year. On that basis, the High Court held that the Tribunal's conclusion regarding admissibility of the bad debt claim was a finding of fact. As no question of law arose from that factual determination, reference under Section 256(2) was not warranted.

Conclusion: No question of law arose for reference, and the request to call for a reference was rejected.

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