Section 256(1) reference fails where the dispute turns only on factual findings, not a question of law.

Questions referred under section 256(1) of the Income-tax Act are not maintainable where they are answered entirely by factual findings and do not involve any question of law. The Delhi High Court held that the Tribunal's treatment of the properties as jointly held, and its conclusion that capital gains on sale were taxable in the hands of the three co-owners in equal shares rather than in the firm's hands, were findings of fact for the relevant assessment year. As the reference raised no legal issue, the Court declined to answer the referred questions.

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Issues: Whether the questions referred under section 256(1) of the Income-tax Act, 1961 arose as questions of law or were concluded by factual findings so as to warrant an answer by the Court.

Analysis: The Tribunal had treated the properties as jointly held and had found, on the facts for the relevant assessment year, that the capital gains on sale were to be taxed in the hands of the three co-owners in equal shares and not in the hands of the firm. The Court held that these conclusions were essentially factual and did not give rise to any question of law.

Conclusion: The Court declined to answer the referred questions.

Final Conclusion: The reference was answered by declining to answer the questions on the ground that they were purely factual, and the matter stood disposed of.

Ratio Decidendi: A reference under section 256(1) is not maintainable for questions that are determined purely by factual findings and do not involve a question of law.

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