Reference under tax law depends on pleadings, analogous authority, and whether expenditure is capital or revenue in nature.

A question on expenditure for a direct feeder line of power was treated as referable where it was supported by analogous authority and arose from the pleadings. A question on whether inauguration expenses formed part of capital cost was not accepted for reference because such expenses were held not to be includible in capital expenditure. A further question on the revenue character and deductibility of inauguration expenses was also treated as fit for reference since the contention had been raised in the grounds of appeal. The application thus succeeded only in part, with reference directed on questions 1 and 3 and declined on question 2.

---

---

Issues: (i) Whether the first question regarding treatment of expenditure on a direct feeder line of power was referable under section 256(2); (ii) whether the second question regarding inauguration expenses as capital cost was referable; (iii) whether the third question regarding the revenue nature and deductibility of the inauguration expenses was referable.

Issue (i): Whether the first question regarding treatment of expenditure on a direct feeder line of power was referable under section 256(2).

Analysis: The expenditure was claimed to have been incurred in circumstances similar to those considered by another High Court decision treating such expenditure as non-capital in nature. On that basis, the question was found to involve a referable issue.

Conclusion: The first question was directed to be referred.

Issue (ii): Whether the second question regarding inauguration expenses as capital cost was referable.

Analysis: The question was not accepted for reference, as the inauguration expenses were held not to be includible in capital expenditure.

Conclusion: The second question was not directed to be referred.

Issue (iii): Whether the third question regarding the revenue nature and deductibility of the inauguration expenses was referable.

Analysis: Although the record did not show detailed argument before the lower authorities, the contention had been raised in the grounds of appeal and was treated as fit for reference.

Conclusion: The third question was directed to be referred.

Final Conclusion: The application succeeded only to the extent of directing reference of questions 1 and 3, while question 2 was declined.

Ratio Decidendi: Where a substantial question is shown to arise from the pleadings and grounds, and is supported by analogous authority, it is fit for reference under section 256(2), but questions not so found are not.

---