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Section 256(2) of the income-tax act, 1961-Reference-Question of law-Assessee-company was incorporated on 22-4-1972 and closed its accounts for the first time on 30-6-1973-ITO, however, disallowed expenses incurred prior to 1-7-1972 as assessment was to be made for twelve months only-aac upheld ito's view and also disallowed expenses as being pre-incorporation expenses-Tribunal held that impugned expenses were not pre-incorporation expenses and allowed these but did not touch upon the basic question whether these expenses had to be disallowed being related to a different year-whether a question of law arose out of tribunal's order-held, on facts, yes Facts The assessee-company was incorporated on 22-4-1972. It closed its accounts for the first time on 30-6-1973 and, therefore, the accounting period was reckoned from 22-4-1972 to 30-6-1973. The ITO held that since the company was to be assessed for a period of twelve months starting from 1-7-1972, the expenses, amounting to Rs. 18,823, incurred prior to that date related to a different year and could not be allowed in this year. On appeal, the AAC also agreed with the ITO, adding that since the business commenced on 1-7-1972, these expenses being pre-incorporation expenses, could not be allowed. On second appeal, the Tribunal allowed the impugned expenses, holding that these could not be described as pre-incorporation expenses because they related to the business. The Tribunal, however, did not touch upon the question whether these expenses had to be disallowed for being incurred before 1-7-1972. The Tribunal also rejected the revenue's reference application under section 256(1). On application under section 256(2) : Held The problem involved in the instant case was whether the basic point on which the ITO decided the case, could be said to have ceased to exist merely because the Tribunal did not mention it at all in its order. The question under reference was dealt with by both the ITO and the AAC. While hearing the appeal, the Tribunal could not have overlooked such a question since this was the very basis of the decision of the ITO and the AAC. This question, therefore, must necessarily have been raised…

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