Reference jurisdiction on dissolution of firm and closing stock valuation requires referral of arguable tax questions

Section 256(2) reference jurisdiction is attracted where arguable questions of law arise from the facts found, including the effect of dissolution of a partnership firm on sales tax liability paid after dissolution and on the valuation of closing stock. A concession on a question of law does not bind a party at a later stage, and the Tribunal need not frame separate references for matters that are only facets of the principal questions already proposed. The text states that, on the facts, the issues required fuller examination on a proper statement of case, and the Revenue's proposed questions were directed to be referred to the High Court.

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Issues: Whether the Tribunal should be directed to refer the questions relating to deletion of the disallowance of sales tax and deletion of the addition to closing stock, in the light of the factual peculiarities and the legal effect of dissolution of the partnership firm.

Analysis: The reference jurisdiction under section 256(2) of the Income-tax Act, 1961 is attracted where arguable questions of law arise from the facts found. The dispute concerned the effect of dissolution of a firm on sales tax liability paid after dissolution, the relevance of the previous year, and the correct approach to valuation of closing stock on dissolution. The court also noted that a concession on a question of law does not bind the party at a later stage, and that the Tribunal need not separately refer questions that are merely facets of the principal questions already framed. In these circumstances, the issues required fuller examination on a proper statement of case.

Conclusion: The questions proposed by the Revenue were directed to be referred to the High Court.

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