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Issues:
- Whether a reference application under section 256 of the Income-tax Act can be made with reference to an order rejecting an application under section 254(2) of the Act. Analysis: The judgment pertains to a case where the Income-tax Appellate Tribunal dismissed the appeals of an assessee regarding the taxation of a credit note received. The assessee contended that the amount was payable to a corporation and hence not taxable under section 41(1) of the Income-tax Act. The Commissioner of Income-tax (Appeals) and the Tribunal upheld the taxation of the amount. Subsequently, the assessee filed a miscellaneous application for rectification, which was also dismissed. The assessee then sought to make a reference application under section 256(1) of the Act. The High Court, in its analysis, referred to previous decisions and concluded that an order rejecting an application under section 254(2) does not give rise to a referable question of law under section 256. The court cited the Popular Engineering Co. v. CIT case and the Jai Bharat Enterprises v. CIT case to support its conclusion. The court emphasized that only an order passed under section 254 of the Act can be the subject of a reference under section 256(1). If an application for rectification under section 254(2) is dismissed, there is no amendment of the original order under section 254(1). Therefore, no reference can be made with reference to the order rejecting the rectification application. The court held that the reference application in the present case was incompetent due to the legal position established by previous decisions. The court declined to refer the case back to the Tribunal, considering it futile in light of the legal position. The judgment disposed of the case without any order as to costs, allowing a counsel's fee for each side. In conclusion, the judgment clarifies the legal position regarding the scope of reference applications under the Income-tax Act in cases where applications for rectification are dismissed by the Tribunal. It underscores that orders rejecting rectification applications do not give rise to referable questions of law under section 256 of the Act. The judgment provides a clear analysis based on established legal principles and previous court decisions, ultimately determining the incompetency of the reference application in the case at hand.
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