JUDGMENT

S.C. Agrawal, J.-Special leave granted.

2. This appeal by the assessee is directed against the order dated July 25, 1984 passed by the Madras High Court in T.C. No. 145 of 1983 wherein the High Court on an application filed under Section 256 (2) of the Act declined to direct the Tribunal to state a case and refer the following questions of law to the High Court :

"1. Whether the Tribunal was right in holding that the levy of the capital gains of Rs. 68,400/- is proper under the facts and circumstances of the case ?

2. Whether the Tribunal was right in holding that mortgage debts does not constitute diversion at source?

3. Whether the debts discharged by the applicant on the properties cannot be said to enhance the cost of acquisition?"

3. The assessee sold a 4385 house property No. 22, Chairman Muthurama Iyer Road, Maduraj for a sum of Rs. 90,000/- subject to incumbrance in the assessment year 1975-76 and for the same assessment year he sold plot Nos. 1, 3 and half of plot No. 4 in T.S. No. 831/1 for a sum of Rs. 12,600/-. The Income Tax Officer computed the capital gains in respect of the said properties at Rs. 68,400/-. The assessee questioned the comput