Reference to High Court required when a question of law arises from the Tribunal's order under income-tax law.

A question of law arising from the Tribunal's appellate order triggers the statutory duty to state a case and refer the matter to the High Court under section 256 of the Income-tax Act, 1961. If the Tribunal refuses such a reference application, the High Court should direct a reference under section 256(2). The Supreme Court declined to express any view on the deductibility of secret commission, so the merits remained open for determination by the High Court on reference.

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Issues: Whether a question of law arose from the Tribunal's appellate order so as to require the Tribunal to state a case and refer the question to the High Court under section 256 of the Income-tax Act, 1961.

Analysis: The appeals arose from the High Court's refusal to direct reference under section 256(2). The Court found that a question of law did arise from the Tribunal's order in each case and, therefore, the Tribunal ought to have allowed the application under section 256(1). On the Tribunal's refusal, the High Court should have directed a reference under section 256(2). The Court expressly declined to pronounce on the merits of the deductible nature of the secret commission so as not to prejudice either side before the High Court.

Conclusion: The reference should be made and the question should be referred to the High Court for opinion.

Final Conclusion: The appeals were allowed, the orders refusing reference were set aside to the limited extent of the reference issue, and the Tribunal was directed to state the case and refer the formulated question to the High Court.

Ratio Decidendi: Where a question of law arises from the Tribunal's order, the Tribunal must allow a reference application and, on its refusal, the High Court must direct a reference under section 256 of the Income-tax Act, 1961.

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