The High Court has the discretion to require the Tribunal to state a case and refer a question of law to the High Court under section 256(2) of the Act. The High Court should exercise its discretion judicially and consider factors such as the correctness of the decision of the Tribunal and whether the question of law is frivolous or unarguable.

JUDGMENT :

M.P. Thakkar, J.

The question of law as to whether a contribution made to a municipality by a company for providing a pipeline through the municipal land for the disposal of the effluents discharged by the company so as to guard against health hazards to the citizens is a revenue expenditure (as contended by the assessee) or a capital expenditure (as contended by the revenue) gets elbowed out for the time being (for being dealt with later) for reasons which will come to the surface presently. (1) An exercise in futility is a "must" and the Appellate Tribunal should be required to state the case and refer the suggested question of law to the High Court when the High Court's powers under section 256(2) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), are invoked either by the assessee or by the revenue. (2) And this "must" has an optionless content, even if the view taken by the Tribunal, giving rise to the suggested question of law, is unimpeachable on merits and is wholeheartedly endorsed by the High Court. (3) We can agree with the opinion formed by the Tribunal after and only after we require the Tribunal to state the, case and again rehear the parties (we have already heard them at this stage of issuing the "rule", but that is not enough. In other words, we must rehear them once again after the case is formally stated and we formally rehear them, and at this stage the "rule" must be made absolute as a matter of course. These three propositions, we must assent to, if we are to accede to the request for requiring the Tribunal to state a case and refer the suggested question of law to this court. We feel no hesitation, or entertain no misgiving on the score, and negative all the three propositions. We propose to give our reasons for doing so, as also for concluding that the opinion formed by the Tribunal, in regard to the question of law suggested by the applicant, is unexceptionable.

2. We propose to settle this seminal question at the threshold at this juncture before we enter upon a discussion on the question of law which the applicant persuaded the Tribunal to refer to the High Court but failed in his attempt.

3. Under sub-section (1) of section 256, the Appellate Tribunal is enjoined to refer the case to the High Court upon any question of law arising out of its order. The expression employed is: "the Appellate Tribunal shall ......... draw up a statement of case and refer it to the High Court."Notwithstanding the fact that the expression "shall" has been employed the courts have taken the view that it is not incumbent upon the Tribunal to invariably make a reference to the High Court merely upon it being shown that a question of law arises out of an order passed by it in appeal, (1) if the point is concluded or covered by a decision of the Supreme Court ; or (2) if the High Court of the concerned State has upheld or sustained the view taken by the Tribunal in an earlier matter and the question is not pending in the Supreme Court from an appeal carried by the aggrieved party from the said decision ; or (3) if it is merely academic and has no impact on the validity of the order passed by it; or (4) if it is frivolous or patently unarguable. For the moment we want to highlight the difference in the language employed by the Legislature in regard to the power conferred on the High Court to require the Appellate Tribunal to state the case and refer the same to it for its opinion as envisaged by sub-section (2) of section 256 of the Act, as contra-distinguished from the language employed by the Legislature in the aforesaid provision. So far as sub-section (2) of section 256 of the Act is concerned, it is enjoined that the High Court "may" if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, upon the powers