Characterisation of rental income from hotel property justified reference of a question of law for judicial opinion.

The High Court considered whether a question of law arose from the Tribunal's order under section 256(2) of the Income-tax Act, 1961 in relation to rental income from letting out hotel property. The central issue was the Tribunal's view that the rental receipts were business income and whether that legal characterisation warranted reference for the Court's opinion. The Court held that the proposed question did arise from the Tribunal's order and was fit for reference, directing the Tribunal to state the case and refer the question of law.

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Issues: Whether a question of law arose from the Tribunal's order so as to warrant a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The application concerned the character of rental income derived from letting out the hotel property and the correctness of the Tribunal's view that such income was business income. The Court found that the proposed question directly arose from the Tribunal's order and was fit for reference for opinion on the legal nature of the income.

Conclusion: The application under section 256(2) was allowed and the Tribunal was directed to state the case and refer the question of law to the Court. The issue was decided in favour of the Revenue.

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