Reference under section 256(2) limited to referable questions of law; factual questions on expenses were excluded.

In an application under section 256(2) of the Income-tax Act, the Tribunal was required to refer only those proposed questions that raised referable questions of law, not every question suggested by the applicant. Applying that distinction, the HC treated most proposed issues on entertainment expenses, Shree Ram Jayanti expenses, marblex flooring and allied expenditure as questions of fact and declined reference. It directed reference only on two questions: the allowability of entertainment expenses and the weighted deduction claimed under section 35B. The Tribunal was accordingly directed to state the case only on those two legal questions.

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Issues: Whether, in an application under section 256(2) of the Income-tax Act, 1961, the Tribunal was bound to refer all the proposed questions or only those questions that gave rise to referable questions of law.

Analysis: The petition sought reference of several proposed questions concerning entertainment expenses, Shree Ram Jayanti expenses, weighted deduction under section 35B, marblex flooring, and allied expenditure. The Court held that, apart from two questions, the remaining proposed questions were questions of fact and did not warrant reference. Only the questions relating to deduction under the head of entertainment expenses of Rs. 28,734 and weighted deduction of Rs. 4,361 under section 35B were found fit for reference.

Conclusion: The Tribunal was directed to state the case and refer only the two identified questions of law.

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