Accrual of commission under mercantile accounting prevented a reference where non-appropriation in books raised no separate question of law.

Under the mercantile system, commission accrued when the right to receive it arose, and the assessee's failure to credit the amount in its books did not prevent accrual. The Tribunal treated 25% of the monthly net realisations as accrued commission and found no factual basis for unrealisability of the amount advanced; the only point raised was non-appropriation in the relevant year. On that footing, no independent referable question of law arose from the refusal to direct a reference under section 256(2) of the Income-tax Act, 1961, and the refusal to state a case was justified.

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Issues: Whether any referable question of law arose from the Tribunal's refusal to direct a reference under section 256(2) of the Income-tax Act, 1961, where the assessee followed the mercantile system and commission on monthly net realisations had accrued though not appropriated in the relevant year.

Analysis: The assessee was following the mercantile system of accounting, and 25% of the monthly net realisations accrued to it as commission. The Tribunal applied the principle that income accrues when the right to receive it arises, and the assessee's omission to credit the amount in its books did not alter the accrual. On the facts, there was no unrealisability of the amount advanced, and the contention rested only on non-appropriation in the year concerned. No independent question of law arose warranting a reference.

Conclusion: The refusal to state a case was justified and the petition failed.

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