Wealth-tax reference principles: no question of law on rule 2B(2), but exemption construction issue required reference.

Rule 2B(2) of the Wealth-tax Rules, 1957 applied only where the market value of closing stock exceeded the balance-sheet value by more than 20%; because that factual threshold was not met, no referable question of law arose and reference on that point was properly refused. By contrast, the assessee's claim to exemption under section 5(1)(xxxii) read with the Explanation to section 5(1)(xxxi) of the Wealth-tax Act, 1957 required construction of the statutory provisions and their application to the Tribunal's findings, so a question of law did arise and the Tribunal was directed to state the case on that issue.

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Issues: (i) whether a reference was required on the applicability of rule 2B(2) of the Wealth-tax Rules, 1957; and (ii) whether a question of law arose on the assessee's claim to exemption under section 5(1)(xxxii) read with the Explanation to section 5(1)(xxxi) of the Wealth-tax Act, 1957.

Issue (i): Whether a reference was required on the applicability of rule 2B(2) of the Wealth-tax Rules, 1957.

Analysis: The rule applies only where the market value of the closing stock exceeds the value disclosed in the balance-sheet by more than 20%. On the facts found in appeal, the market value was less than 20% above the disclosed value, so the factual foundation for invoking the rule was absent.

Conclusion: No question of law arose on rule 2B(2), and refusal to refer that issue was justified.

Issue (ii): Whether a question of law arose on the assessee's claim to exemption under section 5(1)(xxxii) read with the Explanation to section 5(1)(xxxi) of the Wealth-tax Act, 1957.

Analysis: The exemption claim required construction of the relevant statutory provisions and their application to the facts found by the Tribunal, which gave rise to a referable question of law.

Conclusion: A question of law did arise on the exemption issue, and the Tribunal was directed to state the case and refer that question.

Final Conclusion: The application succeeded only to the extent of the exemption issue, while the proposed reference on the rule 2B(2) issue was declined.

Ratio Decidendi: A statutory reference lies only on a question of law that genuinely arises from the Tribunal's order; where the factual basis for applying a rule is absent, no referable question arises, but a construction issue concerning exemption provisions does give rise to a question of law.

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