Bad debt reference turns on factual inference where recoverability is assessed from the debtor's financial condition and record.

The High Court treated the dispute as a factual one: the Tribunal had found, on the material before it, that the debt had become difficult or impossible to recover from a debtor taken over as a sick textile undertaking. Because that conclusion rested on appreciation of circumstances rather than on a debatable legal principle, no referable question of law arose. The request for a reference under section 256(2) of the Income-tax Act, 1961 therefore failed, and the claim for mandamus was rejected.

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Issues: Whether any 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 in relation to the allowance of Rs. 75,000 as bad debt.

Analysis: The Tribunal had found on appreciation of the facts that the amount had become difficult or impossible to recover from the debtor, which had been taken over as a sick textile undertaking. The finding was based on the circumstances of the debtor and the material on record, and the High Court found no legal issue arising from that factual conclusion. The matter was therefore treated as one turning on factual inference rather than a referable question of law.

Conclusion: No question of law arose for reference under section 256(2) of the Income-tax Act, 1961, and the request for mandamus failed.

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