(Appeal by special leave from the judgment and order, dated November 3, 1998 of the Punjab and Haryana High Court in I.T.C. No.41 of 1988).

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Question of law‑‑‑Business expenditure‑‑‑Demurrage and wharfage recovered by Railways ‑‑‑Pendency of claim against contractor for arbitration‑‑‑Whether claim to deduct demurrage and wharfage can be disallowed in entirety‑‑‑Question 'of law‑‑‑Indian Income Tax Act, 1961, Ss.37 & 256.

The question whether the Appellate Tribunal was right in law in upholding the entirety of the disallowance of the amdunt on account of demurrage and wharfage recovered from the assessee by the Railways, merely because a claim against the contractor is pending arbitration, is a question of law.

M. N. Krishnamani, Senior Advocate (Rajesh K. Sharma and Goodwill Indeevar, Advocates with him) for Appellant.

Harish N. Salve, Solicitor‑General of India (Rajiv Tyagi and S.K. Dwivedi, Advocates with him) for Respondent.

ORDER

Special leave granted

After hearing the counsel for the parties, in our opinion, the High Court should have directed the Tribunal to state the case and refer the following question of law to the High Court:

"Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal was right in law in having upheld in entirety the disallowance of the assessee's claim of 'a sum of Rs.8,00,063 on account of demurrage and wharfage recovered from the assessee by the North Western Railways, merely because a claim against the contractor was pending for arbitration?"

We, accordingly, allow the appeal and direct the Tribunal to refer the aforesaid question to the High Court.

M. B. A./1042/FCAppeal allowed