Tax reference questions must arise from the statement of case before a High Court can redraft or answer them

Under section 66(1) of the Income-tax Act, 1922, the High Court cannot redraft a reference question unless it arises from the statement of the case and is shown to have been properly sought in the original application. Where the Tribunal framed a question that did not so arise, and the record did not establish that the question had been included in the assessee's request, the Court lacked a basis to substitute another formulation or answer the reference. The reference was therefore returned unanswered, underscoring the limited scope of the court's power in tax references.

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Issues: Whether the High Court could redraft the question referred under section 66(1) of the Income-tax Act, 1922, and answer it when the formulated question did not arise out of the statement of the case.

Analysis: The reference was made at the assessee's instance under section 66(1). The question actually framed by the Tribunal was not the question arising from the statement of the case, and it was conceded that it did not so arise. The Court held that it could not substitute a different question in place of the one referred, since it had no material before it to know whether the formulated question was or was not one sought in the assessee's application. The power to redraft could not extend to framing and answering a question not shown to have been included in the original application.

Conclusion: The Court declined to redraft the question and returned the reference unanswered.

Ratio Decidendi: The High Court cannot answer or substitute a question in a tax reference unless the question arises out of the statement of the case and is shown to have been properly sought under section 66(1) of the Income-tax Act, 1922.

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