Reference on entertainment expenditure allowed, but no question of law arose from factual finding of no advance tax underestimation.

The Tribunal's refusal to refer the disallowance of tea, refreshments and lodging expenses was unjustified because the expenditure, treated as part of general charges, raised a question of law fit for reference under section 256(2), and the Court directed a statement of the case on that issue. By contrast, the Tribunal's categorical finding that there was no underestimation of advance tax was a finding of fact, so no referable question of law arose on liability to interest under section 216, and no reference was directed on that point.

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Issues: (i) Whether the Tribunal's refusal to refer the question relating to disallowance of tea, refreshments and lodging expenses was justified under section 256(2) of the Income-tax Act, 1961. (ii) Whether the Tribunal's finding that there was no underestimation of advance tax, and therefore no liability to interest under section 216 of the Income-tax Act, 1961, gave rise to a referable question of law.

Issue (i): Whether the Tribunal's refusal to refer the question relating to disallowance of tea, refreshments and lodging expenses was justified under section 256(2) of the Income-tax Act, 1961.

Analysis: The assessee's expenditure under the head "general charges" was treated by the Tribunal as not being in the nature of entertainment expenditure. The revenue accepted that, on the facts and circumstances, the question raised was a question of law fit for reference.

Conclusion: The Tribunal was directed to state the case and refer this question for opinion of the Court.

Issue (ii): Whether the Tribunal's finding that there was no underestimation of advance tax, and therefore no liability to interest under section 216 of the Income-tax Act, 1961, gave rise to a referable question of law.

Analysis: The Tribunal had recorded a categorical finding that there was no underestimation of advance tax. Such a finding was treated as one of fact. In the absence of underestimation, no question of law arose on the levy of interest under section 216.

Conclusion: The Tribunal was not directed to refer this question.

Final Conclusion: The reference was directed only on the entertainment-expenditure question, while the challenge to the finding on advance-tax underestimation and interest under section 216 was rejected.

Ratio Decidendi: A question based on a pure finding of fact, such as categorical absence of underestimation of advance tax, does not give rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.

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