Question of law on deduction under section 57(i) required reference to the High Court for decision.

Interpretation of section 57(i) raised a question of law on the allowability of a deduction claimed on remittance of money, so the High Court should have required the Tribunal to state the case and refer the question. Refusal to direct reference was unsustainable because, where the proposed reference turns on construction of the Act, the High Court must direct a reference under section 256(2) of the Income-tax Act, 1961. The deduction issue was therefore left for determination on reference, with the Revenue obtaining the direction for reference.

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Issues: Whether the High Court was justified in refusing to direct the Income-tax Appellate Tribunal to refer a question concerning the allowability of a deduction arising on remittance of money under section 57(i) of the Income-tax Act, 1961.

Analysis: The question proposed for reference turned on the interpretation of section 57(i) and therefore raised a question of law. In such circumstances, the High Court ought to have required the Tribunal to state the case and refer the question for decision.

Conclusion: The refusal to direct reference was unsustainable; the Tribunal was directed to refer the question to the High Court under section 256(2) of the Income-tax Act, 1961.

Final Conclusion: The assessee's deduction issue was left to be answered on reference, and the Revenue succeeded in obtaining a direction for reference.

Ratio Decidendi: Where the proposed reference raises a question of law involving interpretation of the Act, the High Court should direct a reference under section 256(2) of the Income-tax Act, 1961.

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