Carry-forward loss and section 139 issues required fuller legal consideration before refusing a tax reference.

The entitlement to carry forward loss for different assessment years and the effect of section 139 of the Income-tax Act, 1961 required separate examination for each year on the available facts. The existing record did not show that this distinction had been properly considered, even though the questions involved issues of law. Full consideration by the High Court was therefore warranted in a reference under section 256(2), and the refusal to direct a reference was not justified. The questions of law were directed to be referred to the High Court.

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Issues: Whether the High Court was right in refusing to direct a reference on questions concerning the assessee's entitlement to carry forward loss for different assessment years and the effect of the relevant provisions of section 139 of the Income-tax Act, 1961.

Analysis: The questions turned on the applicability of different legal provisions to two separate assessment years and required consideration of the facts in that light. The existing record did not show that this distinction had been properly examined. Since the questions involved issues of law, they warranted fuller consideration by the High Court in a reference under section 256(2) of the Income-tax Act, 1961.

Conclusion: The refusal to direct a reference was not justified, and the questions of law were directed to be referred to the High Court.

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