Foreign tour expenditure and entertainment disallowance were held to raise referable questions of law under the Income-tax Act.

Foreign tour expenditure claimed as a business deduction raised referable questions of law on allowability and on whether the expense fell within the entertainment expenditure restriction under section 37(2A) of the Income-tax Act, 1961. The Tribunal's refusal to state a case on the ground that no question of law arose was not accepted, because the controversy was held fit for reference under section 256(2). The Tribunal was directed to refer the two proposed questions to the High Court.

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Issues: Whether the Tribunal ought to be directed to refer the two questions proposed under section 256(2) of the Income-tax Act, 1961 concerning the allowability of foreign tour expenditure and its possible treatment as entertainment expenditure.

Analysis: The application arose from the Tribunal's refusal to state a case on the footing that no question of law arose. The Court found that the controversy as to whether the foreign tour expenditure claimed as business deduction was allowable, and whether it attracted the restriction under section 37(2A), did raise questions fit for reference.

Conclusion: The Tribunal was directed to refer the two questions to the Court under section 256(2). The petition was allowed.

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