Sticky loan interest and cash accounting issues were treated as factual, leaving no referable question of law.

Where the Tribunal's determination on interest from sticky loans turned on detailed factual findings and the assessee's cash system of accounting, no referable question of law arose under section 256(2) of the Income-tax Act, 1961. The Tribunal accepted that interest on doubtful loans had been deleted on the facts and that the Revenue's contrary factual basis was incorrect, so State Bank of Travancore v. CIT was held inapplicable. The second question likewise depended on facts, disclosed no independent legal issue, and could not be referred. The reference application was therefore rejected.

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Issues: (i) Whether, on the facts found, deletion of interest on doubtful or sticky loans gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961. (ii) Whether the Tribunal was right in holding that the second question did not involve any referable point of law.

Issue (i): Whether, on the facts found, deletion of interest on doubtful or sticky loans gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The assessee had adopted the cash system of accounting for interest on sticky loans and advances. The Tribunal found, on examination of the facts, that the deletion of interest accrued on loans treated as doubtful was justified. It further recorded in a rectification proceeding that the assessee had stopped crediting interest to the suspense account from 1979-80, making the Revenue's contrary factual basis incorrect. In these circumstances, the decision in State Bank of Travancore v. CIT was held to be inapplicable, and the issue was treated as one turning on findings of fact rather than a question of law.

Conclusion: No referable question of law arose on this issue, and the finding was in favour of the Assessee.

Issue (ii): Whether the second question involved any referable point of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal's finding on the second question also rested on a detailed examination of facts. The question had already been rejected by the High Court in a connected reference application, and it did not disclose any independent legal issue capable of reference.

Conclusion: The second question also did not involve any referable point of law, and the finding was in favour of the Assessee.

Final Conclusion: The reference application was rejected because both questions were found to be factual in nature and no referable question of law survived.

Ratio Decidendi: Where the Tribunal's determination rests on detailed factual findings, including the treatment of interest on sticky loans under the assessee's accounting method, no referable question of law arises under section 256(2) of the Income-tax Act, 1961.

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