Section 80-O net income computation supported a question of law, so the Revenue's reference application could not be refused.

Approval under section 80-O required the deductible income to be computed on net income after deducting expenses incurred in earning that income. Because the lower authorities had found that the assessee had not disclosed the relevant expenditure, and the Tribunal did not disturb that finding, the proposed issue still gave rise to a question of law from the Tribunal's order. On that basis, the Tribunal was not justified in refusing the Department's application for reference under section 256, and the reference was directed to be drawn up on the question proposed by the Revenue.

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Issues: Whether the Tribunal was justified in rejecting the Revenue's application for reference under section 256 of the Income-tax Act, 1961, and whether the question relating to deduction under section 80-O arose as a question of law.

Analysis: The approval granted by the Central Board of Direct Taxes under section 80-O required the deductible income to be computed after accounting for expenses incurred in earning that income, that is, on the basis of net income. The authorities below had recorded a factual finding that the assessee had not disclosed the relevant expenditure, and the Tribunal did not reverse that finding. In that situation, the proposed question was one of law arising from the Tribunal's order, and the Department's application for reference could not have been refused.

Conclusion: The Tribunal was not justified in rejecting the Department's application under section 256, and the reference was directed to be drawn up on the question proposed by the Revenue.

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