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Issues: (i) Whether the question relating to disallowance under section 40A(5) gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961. (ii) Whether the question relating to deductibility of surtax gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.
Issue (i): Whether the question relating to disallowance under section 40A(5) gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.
Analysis: The first question was already covered by a Full Bench decision of the Court on the same point. In the absence of any contrary decision of the Supreme Court, the Full Bench ruling was binding and controlled the issue. A question settled by binding precedent did not present a fresh referable question of law for reference.
Conclusion: The question was held to be not a referable question of law and was answered against the assessee.
Issue (ii): Whether the question relating to deductibility of surtax gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.
Analysis: The second question was governed by another Full Bench decision which held that surtax is a charge on income and a levy on the profits and gains of business, and therefore not an expenditure laid out wholly and exclusively for business purposes. On that basis, it was not allowable as a deduction under section 37 or section 40(a)(ii) of the Income-tax Act, 1961. The issue was thus concluded by binding authority and no referable question of law survived.
Conclusion: The question was held to be not a referable question of law and was answered against the assessee.
Final Conclusion: All the questions proposed in the original petitions were already concluded by binding Full Bench precedent, leaving no referable question of law for reference. The original petitions were dismissed.
Ratio Decidendi: A question of law already concluded by binding precedent of the same Court, in the absence of any contrary decision of the Supreme Court, is not a referable question of law under section 256(2) of the Income-tax Act, 1961.
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