Academic tax question need not be referred, but a substantive question of law must be referred absent binding precedent.

A question that does not affect the merits of the controversy may be treated as academic and refused for reference, so the challenge on computation under section 115J and depreciation was correctly declined. By contrast, where applicability of section 80-I(8) raised a substantive question of law bearing on the merits and no binding precedent existed from the jurisdictional court or the Supreme Court, the Tribunal could not refuse reference. The refusal on the 115J issue was sustained, while reference on the 80-I(8) issue was directed in favour of the Revenue.

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Issues: (i) Whether the Revenue's request for reference on the computation of income under section 115J, including the manner of allowing depreciation, could be declined as academic. (ii) Whether the Revenue was entitled to a reference on the applicability of section 80-I(8).

Issue (i): Whether the Revenue's request for reference on the computation of income under section 115J, including the manner of allowing depreciation, could be declined as academic.

Analysis: The assessee had debited depreciation in its books in accordance with section 205 of the Companies Act, 1956, while claiming depreciation under the Income-tax Rules. On that basis, the question relating to section 115J did not affect the merits of the case and was treated as one of academic importance. The Tribunal's refusal to refer that question was upheld.

Conclusion: The refusal to refer the question relating to section 115J was correct and stands in favour of the assessee.

Issue (ii): Whether the Revenue was entitled to a reference on the applicability of section 80-I(8).

Analysis: The applicability of section 80-I(8) involved a question of law going to the merits of the controversy. In the absence of any binding decision of the jurisdictional court or the Supreme Court on the point, the Revenue's prayer for reference could not have been declined by the Tribunal.

Conclusion: The Tribunal's refusal to refer the question under section 80-I(8) was set aside and the reference was directed in favour of the Revenue.

Final Conclusion: The petition succeeded only in part, with reference directed on the section 80-I(8) question and the refusal sustained on the section 115J question.

Ratio Decidendi: A question that is merely academic and does not affect the merits need not be referred, but a substantial question of law affecting the merits must be referred in the absence of binding precedent.

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