Reference under section 256(2) allowed where Tribunal findings raised a debatable question of law on partnership genuineness.

A reference under section 256(2) of the Income-tax Act, 1961 is warranted where the Tribunal's findings give rise to a debatable question of law. Here, the Tribunal had found the assessee-firm to be not genuine because profits were not distributed in accordance with the partnership deed, and the High Court treated the resulting issue as a question of law fit for reference. The application was therefore allowed, and the Tribunal was directed to state the case and refer the question to the High Court for opinion.

---

---

Issues: Whether, on the facts and in the circumstances of the case, a question of law arose from the Tribunal's order so as to justify a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The application was founded on the Tribunal's finding that the assessee-firm was not genuine because the profits were not distributed in accordance with the partnership deed. The Court held that the proposed question directly arose from the Tribunal's order and was fit for reference to the High Court for opinion.

Conclusion: The application was allowed and the Tribunal was directed to state the case and refer the question of law to the High Court.

Ratio Decidendi: Where the Tribunal's decision gives rise to a debatable question of law arising from its findings, a reference under section 256(2) of the Income-tax Act, 1961 must be directed.

---