High Court cannot reappraise Tribunal facts in income-tax reference; defective findings require remand for clear determination.

In an income-tax reference, the High Court could not reappraise evidence or replace the Tribunal's factual finding that termination of the managing agency was not bona fide and was driven by an improper purpose; that finding had to be accepted, with the legal test applied only to those facts. Where, however, the Tribunal's finding on commercial expediency and the business character of the compensation payment was incomplete or unsatisfactory, the proper course was remand for a clear factual finding after considering all relevant material. The High Court's answer was therefore set aside and the deductibility issue remained open pending fresh determination by the Tribunal.

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Issues: (i) Whether, in an income-tax reference, the High Court could reappraise the evidence and disturb the Tribunal's finding that the termination of the managing agency was not bona fide and was effected for an improper or oblique purpose; (ii) Whether the Tribunal's finding was so incomplete and unsatisfactory that the reference could not be answered and the matter had to be remanded for a clear finding.

Issue (i): Whether, in an income-tax reference, the High Court could reappraise the evidence and disturb the Tribunal's finding that the termination of the managing agency was not bona fide and was effected for an improper or oblique purpose.

Analysis: In a reference under the Income-tax Act, the High Court must proceed on the facts found by the Tribunal and cannot function as a court of appeal by reassessing evidence and substituting its own factual conclusions. Although the allowability of expenditure under section 10(2)(xv) involves a mixed question of fact and law, the factual foundation must come from the Tribunal, and the legal test is then applied to those facts. The Tribunal's finding on bona fides and commercial expediency was a finding of fact, and the High Court went beyond its jurisdiction in overturning it by a fresh appraisal of the record.

Conclusion: The High Court was not entitled to reappraise the evidence or overturn the Tribunal's factual finding on bona fides.

Issue (ii): Whether the Tribunal's finding was so incomplete and unsatisfactory that the reference could not be answered and the matter had to be remanded for a clear finding.

Analysis: The record showed that relevant material bearing on the commercial justification for termination and the effect of the compensation payment had not been fully considered. The Tribunal's order did not clearly and comprehensively record the factual basis necessary for answering whether the payment was wholly and exclusively laid out for business purposes. Where the foundational finding is defective or unclear, the proper course is not to answer the reference on an incomplete factual basis but to remit the matter so that the Tribunal may record a clear finding after considering all relevant evidence.

Conclusion: The Tribunal's finding was defective in law, and the matter had to be remanded for a fresh and clear finding.

Final Conclusion: The High Court's answer was set aside, the matter was sent back for reconsideration by the Tribunal, and the ultimate deductibility question remained open pending a proper factual finding.

Ratio Decidendi: In an income-tax reference, the High Court must accept the Tribunal's findings of fact and cannot reappraise the evidence, and where the Tribunal's finding is incomplete or defective, the proper course is remand for a clear finding under the statutory reference procedure.

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