Question of law on charitable trust exemption and section 13 disqualification justified a reference under tax procedure.

A question of law arose from the Tribunal's refusal to state a case where revisional jurisdiction had been invoked on the ground that the Income-tax Officer had not properly examined exemption under section 11 and the disqualification under section 13(1)(c) for a public charitable trust. The controversy also concerned whether loans advanced to persons covered by section 13(3) affected the trust's entitlement to exemption. On that basis, the High Court found that the matter raised a referable legal question and directed the Tribunal to state the case and refer the formulated question.

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Issues: Whether a question of law arose from the Tribunal's order so as to warrant a direction under section 256(2) of the Income-tax Act, 1961 for stating a case and making a reference.

Analysis: The order under challenge concerned the Commissioner's exercise of revisional jurisdiction on the ground that the Income-tax Officer had not examined the applicability of the exemption provisions and the disqualification under section 13(1)(c) in relation to a public charitable trust. The Tribunal had declined to make a reference, but the material on record showed that the controversy turned on whether the assessment granting exemption under section 11 had been made after proper enquiry into the statutory conditions and the effect of loans advanced to persons falling within section 13(3). That controversy raised a question of law arising out of the Tribunal's order.

Conclusion: The application under section 256(2) was allowed and the Tribunal was directed to state the case and refer the formulated question for decision.

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