Account rejection on evidence is not a question of law, but deduction of messing expenses remained referable

Rejection of account books and related trading additions were treated as findings based on appreciation of evidence, so no referable question of law arose merely because the accounts may have been rejected under one limb of section 145 rather than another. By contrast, disallowance of messing expenses raised a question of law because the Tribunal upheld it on the basis that the nature of the expenditure could not be ascertained from the available details and evidence, leaving the deductibility issue unresolved on the legal character of the claim. A reference was therefore directed only on the messing-expenses issue.

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Issues: (i) Whether the findings sustaining rejection of the account books and trading additions gave rise to any referable question of law; (ii) whether the disallowance of messing expenses at Rs. 7,439 raised a question of law fit for reference.

Issue (i): The findings on rejection of accounts and the consequential trading additions were based on the material on record and turned on appreciation of evidence. The circumstance that the accounts might have been rejected under one limb of section 145 rather than another did not, on these facts, create a question of law.

Conclusion: No referable question of law arose on the issues relating to rejection of accounts and trading additions.

Issue (ii): The disallowance of messing expenses was challenged as an allowable business deduction. Since the Tribunal had sustained the disallowance on the ground that the nature of the expenditure could not be ascertained for want of details and evidence, the matter did give rise to a question of law for reference.

Conclusion: A referable question of law arose on the allowability of the messing expenses.

Final Conclusion: The application was allowed only to the extent of directing a reference on the messing-expenses issue, while the challenges to the account-rejection and trading-addition findings were not entertained as questions of law.

Ratio Decidendi: A finding based on material appreciation of accounts is not referable as a question of law, but the allowability of a claimed deduction may be referable where the legal character of the expenditure remains in issue.

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