Interpretation of assessee agreements gave rise to a referable question of law, requiring a reference under tax law.

Interpretation of the assessee's agreements raised a question of law capable of reference under section 256(2) of the Income-tax Act, 1961. The Tribunal's finding on long-term capital gains was not merely factual; it involved a legal issue that the High Court ought to have directed to be referred. The Revenue sought reference only of question No. (c), and the refusal to require a reference was therefore unsustainable. The Supreme Court set aside the High Court's order and directed the Tribunal to refer question No. (c) to the High Court.

---

---

Issues: Whether a question of law arose from the Tribunal's decision so as to require a reference under section 256(2) of the Income-tax Act, 1961, and whether the High Court was justified in refusing to direct a reference of question No. (c).

Analysis: The Revenue pressed only question No. (c) for reference. The High Court had treated the Tribunal's finding on long-term capital gains as not giving rise to a referable question of law. On the facts stated, the dispute turned on the correct interpretation of the agreements entered into by the assessee, which involved a legal question capable of reference.

Conclusion: A question of law did arise, and the refusal to direct a reference was unsustainable. The order of the High Court was set aside and the Tribunal was directed to refer question No. (c) to the High Court.

---