Cross-questions in tax reference may be referred when the opposite party has already sought a reference.

A party that succeeds before the Tribunal on the main result but whose alternative submissions are rejected is not an aggrieved party for filing its own reference application under section 256 of the Income-tax Act, 1961. However, once the opposite party has invoked the reference jurisdiction, the successful party may seek reference of those rejected cross-questions so that the High Court can consider all questions arising from the Tribunal's order. The High Court's power under section 256(2) is co-extensive with the Tribunal's power under section 256(1), and the request for directions was maintainable. The Tribunal was directed to state the case including the assessee's cross-questions.

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Issues: Whether the assessee, though successful before the Tribunal on the main point, could seek reference of the cross-questions on which its contentions had been negatived when the Revenue had sought a reference on another question.

Analysis: The governing principle is that a party aggrieved by the order of the Tribunal may seek reference under section 256 of the Income-tax Act, 1961. Where the Tribunal's order operates wholly in favour of one party but rejects some of that party's submissions, that party is not an aggrieved party for the purpose of filing its own reference application. However, once the opposite party has invoked the reference jurisdiction, the successful party may ask that the questions arising from its rejected submissions also be referred, so that the High Court can advise on all relevant questions arising from the Tribunal's order. The High Court's power to direct a reference under section 256(2) is co-extensive with the Tribunal's power under section 256(1), and the stage at which the cross-questions may be sought is not confined to the Tribunal proceedings alone.

Conclusion: The assessee was entitled to have the two cross-questions referred, and the request for directions to the Tribunal was maintainable.

Final Conclusion: The application succeeded and the Tribunal was directed to state the case including the assessee's cross-questions.

Ratio Decidendi: A party whose appeal is allowed on the result but whose alternative submissions are rejected may, upon a reference being sought by the opposite party, obtain reference of those rejected questions under section 256 of the Income-tax Act, 1961.

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