Provision versus reserve under tax law: settled precedent left no referable question of law for reference.

Where the legal position is already settled by binding precedent, no referable question of law arises under section 256 of the Income-tax Act, 1961. The governing distinction between a provision and a reserve remains whether the amount is a charge against profits or an appropriation of profits, with company-law accounting treatment informing that classification. Applying that settled principle, the Tribunal treated the impugned items as reserves and also dealt with the dividend-computation issue under the Companies (Profits) Surtax Act, 1964. On that basis, the High Court found that nothing unresolved survived for reference and that the Revenue's reference applications were not maintainable.

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Issues: Whether the questions proposed by the Revenue in the reference applications gave rise to referable questions of law under section 256 of the Income-tax Act, 1961, in view of the settled distinction between a provision and a reserve, and the treatment of gross dividends for computation of chargeable profits under the Companies (Profits) Surtax Act, 1964.

Analysis: The material issue was whether the Tribunal's decision on the classification of amounts described as provisions could be reopened by way of reference. The governing principle was already settled by the Supreme Court: for surtax computation, the distinction between a provision and a reserve depends on whether the amount is a charge against profits or an appropriation of profits, and the accounting treatment under company law informs that distinction. Since the Tribunal had applied that settled principle to hold the impugned items to be reserves and had also dealt with the dividend computation issue, the High Court found that no unresolved question of law survived for reference.

Conclusion: No referable question of law arose, and the reference applications were not maintainable.

Final Conclusion: The Tribunal's view was left undisturbed, and the Revenue failed to secure a reference to the High Court.

Ratio Decidendi: Where the legal position is already settled by binding precedent and the Tribunal has applied that settled principle to the facts, no reference lies under section 256 of the Income-tax Act, 1961.

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