Plantation expenditure deduction under section 37(1) was held to raise a referable question of law, while depreciation issue was excluded.

Expenditure on plantation in factory premises and residential quarters was treated as raising a referable question of law on deductibility under section 37(1) of the Income-tax Act, 1961, and that question was directed to be referred. The Court found the allowability issue to be of a legal character arising from the Tribunal's order. The proposed question on whether the same expenditure formed part of the actual cost of assets for depreciation under section 32 was not entertained, because it did not arise from the Tribunal's order and therefore was not fit for reference.

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Issues: Whether the expenditure incurred on plantations in the factory premises and residential quarters gave rise to a referable question of law under section 37(1) of the Income-tax Act, 1961.

Analysis: The application under section 256(2) was confined to determining whether the proposed question on allowability of the plantation expenditure as a deduction under section 37(1) involved a question of law arising from the Tribunal's order. The Court accepted that this issue was of a legal character and was fit to be referred. The further proposed question concerning inclusion of the expenditure in the actual cost of assets for depreciation under section 32 was not entertained because it did not arise from the Tribunal's order.

Conclusion: The question relating to allowability under section 37(1) was directed to be referred, while the depreciation-related question was not referred.

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