Stock-in-trade findings and settled 80P exemption principles leave no referable question of law

A Tribunal's finding, based on appreciation of evidence, that shares and units were held as stock-in-trade is treated as a finding of fact and does not ordinarily raise a referable question of law. The note also records that, on settled precedent, interest or dividend from Government securities or similar investments held as stock-in-trade by a co-operative society may qualify for exemption under section 80P(2), so no fresh or statable question of law arises for reference under section 256(2). The practical effect is that factual findings and issues governed by existing precedent will not justify a reference to the High Court.

---

---

Issues: (i) Whether the Tribunal's finding that the shares of the Agricultural Refinance Corporation and the units of the Unit Trust of India were held as stock-in-trade gave rise to a question of law; (ii) Whether the income from those shares and units was exempt as business income under section 80P(2) of the Income-tax Act, 1961, so as to require a reference.

Issue (i): Whether the Tribunal's finding that the shares of the Agricultural Refinance Corporation and the units of the Unit Trust of India were held as stock-in-trade gave rise to a question of law.

Analysis: The Tribunal's conclusion was based on the material on record and turned on appreciation of evidence. Such a finding was treated as a pure finding of fact. No material was shown to disturb that factual conclusion or to convert it into a legal issue referable under section 256(2) of the Income-tax Act, 1961.

Conclusion: The issue was answered against the assessee and in favour of the Revenue; no question of law arose.

Issue (ii): Whether the income from those shares and units was exempt as business income under section 80P(2) of the Income-tax Act, 1961, so as to require a reference.

Analysis: The court followed its earlier view that interest or dividend earned on Government securities or analogous investments held as stock-in-trade by a co-operative society qualifies for exemption. In light of that settled position, the proposed question did not present a fresh or statable question of law warranting reference under section 256(2) of the Income-tax Act, 1961.

Conclusion: The issue was answered against the assessee and in favour of the Revenue; no statable question of law arose.

Final Conclusion: The applications under section 256(2) failed because both proposed questions were either factual or already governed by settled precedent, and no reference to the High Court was warranted.

Ratio Decidendi: A Tribunal's finding based on appreciation of evidence as to whether assets are held as stock-in-trade is ordinarily a finding of fact, and no reference lies where the proposed question is covered by settled precedent on exemption of income from stock-in-trade held by a co-operative society.

---