Reference under income-tax law can cover only questions arising from the Tribunal's order, not new issues raised later.

Under section 256(2) of the Income-tax Act, 1961, only a question of law arising from the Tribunal's order can be compelled to be referred to the High Court. A question not raised before the Tribunal in the section 256(1) application cannot be introduced for the first time in the section 256(2) proceedings. The question whether income taxed in the hands of beneficiaries could again be taxed in the hands of the assessee-trust was held to arise from the Tribunal's order, and the earlier decision relied on did not answer that issue on merits or bar reference. The reference was directed only on that question.

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Issues: Whether a reference could be compelled under section 256(2) of the Income-tax Act, 1961 only on the question which arose from the Tribunal's order, and whether questions not raised before the Tribunal under section 256(1) could be introduced for the first time in the application under section 256(2).

Analysis: Questions not raised before the Tribunal in the application under section 256(1) could not be permitted to be raised for the first time under section 256(2). On the other hand, the question whether income taxed in the hands of the beneficiaries could again be taxed in the hands of the assessee-trust was found to arise from the Tribunal's order. The earlier decision relied upon by the Tribunal had not answered that question on merits and did not bar reference of the issue.

Conclusion: The application succeeded only in respect of the question which arose from the Tribunal's order, and the Tribunal was directed to state the case and make a reference on that question.

Ratio Decidendi: In proceedings for a reference under section 256(2) of the Income-tax Act, 1961, only a question of law arising from the Tribunal's order can be compelled to be referred, and a question not raised before the Tribunal cannot be introduced for the first time in the reference application.

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