Reference lies only on questions of law; factual expenditure issues and inapplicable Rule 6B were excluded.

Questions on maintenance expenditure for Sikri Garden and pro rata electricity and water charges for directors' premises were treated as factual matters and not substantial questions of law, so reference was declined. The question on presentation articles was held outside Rule 6B of the Income-tax Rules, 1962 because the articles were given to visitors to the factory and not as advertisement gifts, so no reference was made on that issue. By contrast, the questions on deletion of notional interest on a loan and allowance of repairs expenditure were treated as questions of law fit for reference, and only those questions were referred.

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Issues: (i) Whether the first and third questions sought to be referred were referable as questions of law or were questions of fact; (ii) whether the fifth question regarding presentation articles was governed by Rule 6B of the Income-tax Rules, 1962; and (iii) whether the second and fourth questions were questions of law fit for reference.

Issue (i): Whether the first and third questions sought to be referred were referable as questions of law or were questions of fact.

Analysis: The questions relating to allowance of expenditure on maintenance of Sikri Garden and to pro rata electricity and water charges for directors' premises turned on the Tribunal's factual findings. Such issues did not raise any substantial question of law warranting reference.

Conclusion: The first and third questions were questions of fact and were not directed to be referred.

Issue (ii): Whether the fifth question regarding presentation articles was governed by Rule 6B of the Income-tax Rules, 1962.

Analysis: The expenditure was found to relate to articles given to persons visiting the factory under the management's directions, and it was not claimed to be presentation by way of advertisement. Rule 6B applied only to presentation of articles by way of advertisement, and therefore had no application on the facts found.

Conclusion: The fifth question did not call for reference, as Rule 6B was inapplicable.

Issue (iii): Whether the second and fourth questions were questions of law fit for reference.

Analysis: The questions concerning deletion of notional interest on a loan and allowance of repairs expenditure involved legal issues and were not shown to be merely factual determinations.

Conclusion: The second and fourth questions were directed to be referred as questions of law.

Final Conclusion: The reference application succeeded only in respect of the second and fourth questions, and the remaining questions were declined.

Ratio Decidendi: Only questions involving a substantive issue of law are referable; issues that depend solely on factual findings, or on the inapplicability of a provision on the facts found, are not fit for reference.

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