Reference to High Court turns on genuine questions of law; factual findings cannot justify reference, but cess liability may be revenue expenditure.

A reference lies only where a genuine question of law arises; factual findings or self-evident factual inferences do not justify reference. The Delhi HC held that the proposed questions on disallowance under section 80VV, accrual of cess liability, and the taxability of dealers' contribution were not referable because they depended on factual determinations, including the absence of a finding that expenditure was incurred before income-tax authorities and the transfer of the dealers' contribution to a separate legal fund. However, following Arvind Mills Ltd. v. CIT, the Court held that the allowability of liability for payment of cess as revenue expenditure did raise a referable question of law.

---

---

Issues: Whether questions relating to disallowance under section 80VV, accrual of cess liability, and taxability of dealers' contribution raised questions of law warranting reference, and whether the liability for payment of cess was allowable as revenue expenditure.

Analysis: The Court held that the first three proposed questions did not give rise to questions of law. The application of section 80VV required a factual finding that the assessee had incurred expenditure in proceedings before the income-tax authorities, the Appellate Tribunal, or a court, and no such finding existed. The finding that liability for cess had accrued in the relevant year was treated as an inference of fact. The dealers' contribution to the development fund was found to have never been utilised by the assessee and to have been transferred to a separate legal fund, making its taxability self-evident on the facts. In view of the Supreme Court decision in Arvind Mills Ltd. v. CIT, however, one question of law did arise on the allowability of cess liability as revenue expenditure.

Conclusion: The Court declined to refer the first, second, and third proposed questions, but directed reference of the question whether the liability for payment of cess was allowable as revenue expenditure.

Ratio Decidendi: A reference lies only on a genuine question of law, not on issues concluded by factual findings or self-evident factual inferences; however, the allowability of cess liability as revenue expenditure may still raise a referable question of law.

---