Factual finding on accrual of interest liability meant no referable question of law arose under income-tax reference provisions.

Deduction of interest for earlier years was upheld on a factual finding that the assessee could not have discovered the default earlier, because the compromise decree allowed satisfaction either by cash instalments or by adjustment against future motor vehicle supplies. The Tribunal accepted that the assessee became aware of the default only when execution proceedings began, and that the interest provision in the relevant year was therefore justified. As the decision turned on appreciation of evidence and accrual of liability, no debatable question of law arose for reference under section 256(2) of the Income-tax Act, 1961. The Revenue's request for reference was rightly rejected.

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Issues: Whether the Tribunal's decision allowing deduction of interest relating to earlier years raised any question of law warranting a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal's conclusion turned on the factual determination that, although liability to pay interest arose on default, the assessee could not have discovered the default earlier because the compromise decree permitted satisfaction of the decree either by cash instalments or by adjustment against future supplies of motor vehicles. On the evidence, the Tribunal accepted that the assessee became aware of the default only when execution proceedings were initiated, and that the interest provision made in the relevant year was justified on those facts. Such a finding involved appreciation of facts rather than a debatable legal issue.

Conclusion: No question of law arose from the Tribunal's order, and the Revenue's prayer for reference was rightly rejected.

Ratio Decidendi: Where the Tribunal's decision on allowability of a deduction rests on a pure finding of fact regarding accrual and discovery of liability, no referable question of law arises under section 256(2) of the Income-tax Act, 1961.

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