Tribunal cannot refuse reference on an issue it earlier declined to decide; Revenue's reference application succeeded.

Where the Tribunal had earlier declined to decide the effect of section 80V on the assessee's claim because the claim succeeded on other grounds, it could not later reject the Revenue's section 256(1) reference application on that very undecided issue. The High Court found that the Tribunal had already referred the same question in earlier appeals on identical facts, so refusing reference in the present matter was erroneous. The Revenue's applications were allowed, and the Tribunal was directed to state the case and refer the question whether only net interest was taxable after deducting interest paid to M/s. Gwalior Agencies.

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Issues: Whether the Tribunal was justified in rejecting the Revenue's application under section 256(1) of the Income-tax Act, 1961 on the ground that the deduction was allowable under section 80V of the Income-tax Act, 1961 in any event, and whether the Tribunal should be directed to state the case and refer the question proposed by the Revenue.

Analysis: The Tribunal had dismissed the Department's appeals for the relevant assessment years by following its earlier orders on identical facts and issues, and in those earlier matters it had already referred the proposed question at the instance of the Revenue. The Tribunal had also expressly declined to examine the effect of section 80V on the assessee's claim, taking the view that the claim succeeded on other grounds and that it was unnecessary to decide the section 80V aspect. In these circumstances, the Tribunal could not reject the Revenue's application on the very ground which it had earlier chosen not to adjudicate.

Conclusion: The rejection of the Revenue's application was erroneous, and the Tribunal was required to state the case and refer the question proposed.

Final Conclusion: The Revenue's reference applications succeeded, and the Tribunal was directed to make a reference on the question whether only net interest was liable to be brought to tax after deducting interest paid to M/s. Gwalior Agencies.

Ratio Decidendi: Where the Tribunal has declined to decide a legal issue on merits, it cannot later refuse to refer the same question under section 256(1) by relying on that very undecided issue as an alternative ground for rejection.

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