Question of law from unsupported findings: Tribunal had to state a case on capital or revenue receipts and business disappearance.

Under section 66(1) of the Indian Income-tax Act, 1922, a question of law arises where a factual finding is unsupported by competent evidence, rests on no evidence, or is based on conjecture. The character of a receipt as capital or revenue is itself a question of law. On that basis, the Tribunal's conclusion that the assessees' business structure or entire activity had disappeared was vulnerable because, if it lacked evidentiary foundation, refusal to state a case could not be sustained. The order refusing reference was set aside and the proposed questions of law were directed to be referred to the High Court.

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Issues: Whether the Tribunal's refusal to state a case was justified when the Commissioner sought reference on the nature of the receipts and on the alleged disappearance of the business structure.

Analysis: Under section 66(1) of the Indian Income-tax Act, 1922, a question of law arises where a finding of fact is unsupported by any competent or legally sufficient evidence, is based on no evidence, or rests on conjecture. The nature of a receipt as capital or revenue is itself a question of law. If the Tribunal's conclusion that the assessees' business structure or entire activity had disappeared had no evidentiary foundation, the refusal to make a reference could not stand.

Conclusion: The Tribunal's order was set aside and it was directed to state the case and refer the proposed questions of law to the High Court in favour of the Revenue.

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