Deductibility of additional super-tax in share valuation was a question of law requiring reference to the High Court.

Whether additional super-tax payable under section 23A of the Indian Income-tax Act, 1922, or section 104 of the Income-tax Act, 1961, was deductible in computing the break-up value of shares for wealth-tax purposes was a question of law, not fact. The Tribunal was therefore bound to refer the question to the High Court under section 27(1) of the Wealth-tax Act, 1957, because it arose directly from the Tribunal's order. The refusal to state the case was unjustified, and the High Court should have directed a reference. The appeals were allowed and the matter was remitted for disposal in accordance with law.

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Issues: Whether the Tribunal was bound to refer to the High Court the question whether additional super-tax payable under section 23A of the Indian Income-tax Act, 1922 or section 104 of the Income-tax Act, 1961 was deductible in computing the break-up value of shares for wealth-tax purposes.

Analysis: The question arose directly from the Tribunal's order and involved the legal character of the deduction claimed in computing the break-up value of shares. The Court held that the Tribunal was wrong in treating the matter as one of fact, because the issue whether the additional tax liability was deductible was a question of law. Since the question clearly arose from the order of the Tribunal, the Tribunal ought to have referred it under section 27(1) of the Wealth-tax Act, 1957, and the High Court ought to have required such reference.

Conclusion: The Tribunal's refusal to state the case was unjustified, and the High Court erred in refusing to direct a reference. The appeals were allowed and the matter was remitted to the High Court for disposal in accordance with law.

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