Scope of reference limits profit apportionment directions; High Court could not add an unexamined 75:25 split.

The High Court could not add a direction apportioning profits between manufacturing and selling processes when answering a reference confined to whether receipts were taxable on an accrual basis or receipt basis. Because the apportionment issue was outside the scope of the reference and had not been examined by the Tribunal, the court had travelled beyond the question referred. The Tribunal retained power to determine apportionment if that matter remained undecided earlier. The direction fixing a 75:25 division of profits was therefore unsustainable and was rightly deleted from the High Court's answer.

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Issues: Whether the High Court was justified in including a direction that the profits should be apportioned as 75% for the manufacturing process and 25% for the selling process while answering the reference.

Analysis: The reference before the High Court was confined to the taxability of the receipts on accrual basis or receipt basis. The question of the correct apportionment of profits between manufacturing and selling processes did not arise from the reference and had not been examined by the Appellate Tribunal. The High Court therefore travelled beyond the scope of the question referred. The Tribunal retained power to deal with apportionment if that matter had not been determined earlier.

Conclusion: The direction as to apportionment of profits could not be sustained and was rightly deleted from the High Court's answer.

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