Reference on question of law cannot be refused merely because the Tribunal prefers non-binding High Court decisions.

Where a question of law arises from the facts and there is no binding precedent of the Supreme Court or the jurisdictional High Court, the Tribunal cannot decline a reference merely because it prefers non-binding decisions of other High Courts. The text explains that reliance on out-of-jurisdiction authorities, or on a Supreme Court decision not directly on point, does not justify refusing to state a case under section 256(2) of the Income-tax Act, 1961. The Tribunal was therefore not justified in refusing the reference, and the question of law had to be referred to the High Court.

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Issues: Whether the Tribunal was justified in declining to refer the proposed question of law under section 256(2) of the Income-tax Act, 1961, on the ground that the controversy was covered by non-binding High Court decisions.

Analysis: The Tribunal had relied on decisions of the Gujarat and Allahabad High Courts and on a Supreme Court decision that was not directly on the point. The governing principle is that where a question of law arises from the facts and there is no binding precedent of the Supreme Court or the jurisdictional High Court, the Tribunal cannot refuse a reference merely because it prefers the view taken in decisions of other High Courts.

Conclusion: The Tribunal was not justified in refusing the reference. The question of law did arise and the Tribunal was directed to state the case and refer the question to the High Court.

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