Hybrid accounting for a distinct transaction can rest on factual findings, leaving no referable question of law.

A question of law did not arise for reference under section 256(2) where the Tribunal, on appraisal of the accounts and the character of the transaction, found that the assessee's transport business followed the mercantile system while a pronotes-related transaction was special and distinct. On that factual basis, the Tribunal held that a hybrid system of accounting could be adopted for that transaction. Those findings were treated as findings of fact, with no legal error shown requiring reference.

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Issues: Whether, in proceedings under section 256(2) of the Income-tax Act, 1961, a question of law arose for reference on the Tribunal's finding that the assessee could follow a hybrid system of accounting for a special transaction distinct from its regular transportation business.

Analysis: The Tribunal had examined the accounts for the relevant assessment years and found that the assessee's main business was transport of goods, for which it followed the mercantile system, but the pronotes-related transaction was of a special character, distinct from the other business transactions. It further concluded that the assessee was entitled to adopt a hybrid system of accounting for that transaction. These conclusions were based on appreciation of facts and the character of the transaction, and did not disclose any legal error requiring reference.

Conclusion: No referable question of law arose; the Tribunal's findings were treated as findings of fact and the petitions were dismissed.

Ratio Decidendi: Where the Tribunal's conclusion that a transaction is special and distinct, and that a hybrid method of accounting is permissible for it, rests on factual appreciation, no question of law arises for reference under section 256(2) of the Income-tax Act, 1961.

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