Reference of questions of law directed where capital expenditure treatment of road and tube-well contributions required High Court opinion.

Where proposed questions of law directly arise from the Tribunal's order on whether amounts contributed for road construction and tube-well construction are capital expenditure, the High Court may direct a reference under section 256(2) of the Income-tax Act, 1961. The Court found that the character of the contributions and the resulting denial of deduction were fit for consideration in reference proceedings, and the Tribunal was required to state the case and refer the questions of law for opinion.

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Issues: Whether the Tribunal was justified in refusing to refer the questions of law arising from the disallowance of amounts contributed by the assessee towards road construction and tube-well construction as capital expenditure.

Analysis: The application was under section 256(2) of the Income-tax Act, 1961. The Court found that the proposed questions, relating to the character of the impugned contributions and the consequent denial of deduction, did arise out of the Tribunal's order and were fit to be referred for opinion.

Conclusion: The refusal to state the case was not upheld, and the Tribunal was directed to refer the stated questions of law.

Final Conclusion: The assessee succeeded in obtaining a direction for reference of the questions of law to the High Court.

Ratio Decidendi: Where a proposed question directly arises from the Tribunal's order and bears on the allowability of a deduction, the High Court may direct a reference under section 256(2) of the Income-tax Act, 1961.

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