Law:

Section:

Section 256 of the Income-tax Act, 1961 [Corresponding to section 66(2) of the Indian Income-tax Act, 1922] - High Court - Reference to - Whether, in dealing with application under section 66(2) of 1922 Act, High Court is only to consider whether a question of law which may be supported by reasonable argument, arose out of order of Tribunal and it is not called upon to decide whether question may ultimately be decided in favour of assessee - Held, yes FACTS Under a trust deed certain properties described in Schedules A, B and C were settled by the settlor and the trustees were appointed to administer the trust. The ITO brought to tax the unspent balance of income of Schedule A properties and a 3/8th share of income from properties in Schedules B and C. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal set aside the order of the AAC. The Commissioner applied to the Tribunal to draw up a statement of case and refer the question to the High Court. The Tribunal drew up a statement of case limited to 2/8th of the properties in Schedule B and C and declined to refer a question related to 1/8th of income of the properties. The Commissioner applied to the High Court for a direction to the Tribunal to submit a statement of case relating to 1/8th share of the property as well. The High Court rejected the Commissioner's application. On appeal to Supreme Court: HELD The Tribunal was called upon to interpret the directions contained in clause 13(b) of the deed and it proceeded to interpret that clause. The true legal effect of the directions contained in clause 13(b) of the deed of trust raised a question of law which arose out of the order of the Tribunal and the High Court erred in failing to direct that a statement of case in so far as it related to the 1/8th share of the income of properties in schedules B and C be submitted. The investments in property were meant to augment the assets of the trust for the benefit of charities mentioned in the deed of trust and they were no more than accumulations for application to the charitable purposes within the meaning of section 4(3)(i) of the 1922 Act. It must be pointed out that the High Court in…

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