Summarize the following court judgment. Appeal No. 1308 of 1970. Appeal by special leave from the order dated September 8. 1970 of the Calcutta High Court in Income Tax Reference No. 50 of 1971. N. A. Palkhivala	 Veda Vyasa	 T. A. Ramachandran and D. N. Gupta	 for the appellant. Y. section Desai	 section K. A iyar and H. D. Sharma	 for the respondent. The Judgment of the Court was delivered by Grover	 J. This is an appeal by special leave from an order of the Calcutta High Court directing the Income tax Appellate Tribunal	 'B ' Branch	 Calcutta	 to draw a statement of case relating to four questions of law which	 it was stated	 arose out of the order of the Tribunal in the matter of assessment of the appellant which was the assessee in respect of the assessment year 1962 63. The Appellate Tribunal had rejected the application of the Commissioner of Income tax requiring it to refer those questions to the High Court. The High Court	 on being moved	 issued a rule nisi and then made it absolute after full arguments without giving any reasons	 whatsoever. 140 The assessee is a 100% subsidiary of Imperial Chemical In dustries Ltd.	 incorporated in the United Kingdom (hereinafter referred to as I.C.I. for convenience). I.C.I. advanced large amounts by way of loans to the assessee from time to time. This	 it was claimed	 was done for subscribing to shares in three Indian Companies called Indian Explosives Ltd.	 Alkalai & Chemical Corporation of India and Atic Industries Private Ltd.	 (hereinafter called as I.E.L.	 A.C.C.I and ATIC respectively). Subsequently the assessee transferred the shares in the aforesaid companies at par to I.C.I. in satisfaction of the loans advanced by that company. The Income tax Officer applied section 52 of the Income tax Act	 1961 (hereinafter called the 'Act ') and assessed the assessee to capital gains. The Appellate Assistant Commissioner took the contrary view and held that on the facts which had been established	 the assessee was not liable to capital gains under the aforesaid section. The Tribunal upheld the decision of the Appellate Assistant Commissioner by a detailed and well reasoned order. Broadly	 the case of the assessee was that I.C.I. wanted to make investments in India in sterling currency. The assessee was already in existence but the other three companies which have been mentioned	 were incorporated later. I.C.I. devised a scheme by which it could make the investment as desired by it and by which it could also take advantage of the tax relief which could be availed of by the new enterprises under section 15(C) and 56.(A) of the Income tax Act	 1922. The scheme in short was that I.C.I. would arrange to let the assessee hold shares in the three com panies by investing the money which was to be given by I.C.I. to the assessee. The modus operandi was that I.C.T. would give that money by way of loans to the assessee who agreed that the shares in the three companies would be transferred to I.C.I. in satisfaction of the loans at par or issue price as and when desired by I.C.I. All this was done after negotiations with the concerned Department of the Government of India at the highest level and with the approval of the Reserve Bank of India. The entire scheme was conceived and was put into operation prior to 30th November 1956 when the Finance Bill was introduced reimposing capital gains tax which had remained abolished for certain years. There was a provision for charging interest by the I.C.I. from the assessee at a rate not exceeding 1/2% above the Indian Bank rate which came to 51% per annum but the interest was not to exceed in any case the dividends received by the assessee from those shares. It was claimed on behalf of the assessee that this arrangement was advantageous both to I.C.I. and the assessee	 I.C.I. having taken the risk (of depreciation in shares or otherwise) attached to the new business pioneering adventures	 ensured that capital appreciation of the shares	 if 'any	 also went 141 to itself. The assessee did not suffer any disadvantage because it had to pay no interest if no dividend was received and it could keep and get the benefit of any dividend in excess of 5 1/2%. As a result of I.C.I. investments being held through the assessee instead of directly	 I.C.I. achieved an advantage of saving tax in U.K. amounting to pound 68	000 in the relevant years. In 1959 the structure of Indian taxation regarding the grossing up of dividends was radically changed and by the Finance Act 1959	 the system of grossing up of dividends (under section 16(2) and 18(5) of 1922 Act) was abolished and intercorporate dividends became liable to income tax at each stage. Thus	 the dividends passing from the three companies through the assessee to I.C.I. became liable to tax stages. This affected the net return of I.C.I. on its investments in the three companies substantially. In these circumstances	 it was decided by I.C.I. that the investments in the three companies should 'he held by it directly. For that reason it called upon the assessee in February 1961 to transfer to it the aforesaid shares in the three companies at the issue price in satisfaction of the sterling loans in accordance with the previous agreements. The approval of the Reserve Bank to these transfers was received in February 1961 and the transfers were made in March/April 1961. According to the assessee there was no question of the transfer of shares having been affected with the object of avoidance or reduction of the liability of the assessee to capital gains which alone could attract the applicability of section 52 of the Act. Section 52 is in the following terms "Consideration for transfer in cases of under statement: Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income tax Officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45	 the full value of the consideration for the transfer shall	 with the previous approval of the Inspecting Asstt. Commissioner	 be taken to be the fair market value of the capital asset on the date of the transfer". The necessary ingredients of the section are (i)there should be a direct or indirect connection between the person who acquires a capital asset and the assessee; (ii) the Income tax Officer should have reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee to capital gains; (iii) if the first two conditions are satisfied then the full value of consideration for the 142 transfer can be taken to be the fair market value of the capital asset on the date of the transfer. As regards the first requirement	 that was admittedly satis fied in the present case. The second requirement could be satisfied only if there was any cogent material on which the Income tax Officer could have reason to believe that the transfers were effected with the object of avoidance and reduction of liability to capital gains. It is abundantly clear that the intention with which a particular transfer is made and the object which is to be achieved by such transfer is essentially a question of fact the conclusion relating to which is to be arrived at on a consideration of the relevant material. In other words	 before the Income tax Officer can have any reason to believe that a transfer was effected with the object mentioned in the section facts must exist showing that the object was to avoid or reduce the liability to capital gains. The Tribunal examined fully the correspondence and the other material with regard to each of the three Indian companies in which the investment had been made of the money advanced by I.C.I. to the assessee. We may briefly notice the discussion relating to each company. It was in or about 1949 that I.C.I. was asked by the Government of India to consider the manufacture of commercial Lasting High Explosives in India. Negotiations advanced more towards October 1953 when the representatives of I.C.I. met the officials of the Government of India. The Tribunal referred to the minutes of the meeting held on October 1	 1953 as also on the 6th October 1953. In the final draft of the Declaration of Intention dated November 5. 1953	 it was mentioned that the Government had agreed that if T.C.I. made a loan to the assessee the latter would hold the shares in I.E.L. and that the loan "may be repaid by a transfer of the shares to I.C.I. at any time". On 21st December 1954	 the assessee applied to the Reserve Bank of India for formal sanction for borrowing Rs. 160 lakhs from I.C.I. for the purchase of shares in I.E.L. in terms of the agreement dated November 5	 1953. It was stated in the letter that I.C.I. would charge no interest until such time as the shares began to yield dividends. The loans were advanced from 30th September 1954 to 30th June 1957 by the I.C.I. to the assessee of the equivalent of Rs. 160 lakhs in Sterling. The other correspondence relating to the aforesaid amount was also noticed by the Tribunal. In 1958 there was a Rights Issue by I.E.L. I.C.I. agreed to give a loan of Rs. 80 lakhs to the assessee to cover the Sterling requirement of I.E.L. The assessee was to take up shares of that amount. The terms of the loan were that I.C.I. had the right to acquire at any time the shares held by the assessee in I.E.L. 143 at par in satisfaction of the loan and the rate of interest payable on the loan was to be I% above the Indian Bank rate. This was followed by other correspondence and a resolution which was recorded on 30 9 1958 containing terms of the second loan of Rs. 80	00	000/ . It is not necessary to refer to the other correspondence looked into by the Tribunal with regard to that loan. On 15 2 1961 the assessee was called upon by I.C.I. to transfer the investments in satisfaction of the loans. After the sanction was obtained from the Reserve Bank of India	 the shares were transferred at par. The Tribunal referred to the undisputed facts relating to the circumstances in which the scheme for advancing the loan to the assessee for investment in I.E.L. came to be mooted and was ultimately approved by the Government. This is what the Tribunal said : "The above background would show that the idea was not to make the assessee the real beneficial owner of the shares. The fact that the shares should be held only for a time beneficially by the assessee is clear from the "Declaration of Intention" dated 5 11 1953". Before the Tribunal the counsel for the Department had accepted the position that if there was an arrangement or agreement before the reintroduction of capital gains tax he would have no case. According to him	 until the transfers were actually made of the shares	 there was no agreement on which the parties could have gone to court in order to obtain the share transfers at par in favour of I.C.I. The Tribunal proceeded first to examine whether there was any kind of understanding between the assessee and I.C.I. regarding the transfer of shares at par. After recapitulating the correspondence and the relevant facts	 the Tribunal came to the following conclusion: "Taking this along with the minutes of the meeting with the officials of the Government of India	 in October 1953	 it is clear that the whole idea of I.C.I. throughout was to make some funds available to the assessee so that the shares could be acquired in its name and that the shares could be transferred to I.C.I. as and when it demanded". It was	 however	 stated by the Tribunal that taking into account the correspondence and the documents referred to earlier it was satisfied with the assessee 's case that the transfer of shares to London at issue price or at par was throughout the basis of the advances of loans to the assessee. It is necessary to reproduce paragraph 31 of the order of the Tribunal : "In October 1953	 there was no mention of any capital gains tax being revived. At that time the asses 144 see could not have had any idea of avoiding or reducing any liability to capital gains tax. The learned counsel for the department laid some emphasis on the fact that there was no enforceable arrangement. The question as to whether there was an enforceable arrangement or not is not really material. What we have to find out is whether the object in putting through these transactions of taking over the shares at par or at issue price was one of avoidance or reduction of liability to capital gains tax. That object does not get established by the mere absence of an enforceable arrangement. Having regard to the assessee being the subsidiary of I.C.I.	 there is nothing surprising about the arrangement not being so formal or not being put through after complying with all the necessary legal formalities. The absence of formal agreement is thus understandable in this context and cannot by itself suggest anything in favour of the department. Businessmen are not always motivated by legalistic considerations. Even taking that the arrangement was only binding morally and not legally	 still so long as the assessee wanted to fulfil a moral obligation and had not the capital gains tax in mind	 it cannot be said that the transaction was entered into with the object of avoidance or reduction of liability to capital gains tax". The Tribunal proceeded to say "We have to find out the object of the	 transaction. It is removed in point of time from the result. In such a case one cannot try to infer the object from the results. We really have to put ourselves at a point of time when the transaction was conceived. Taking the materials before us	 we consider that there is nothing to suggest that the parties had the capital gains tax in their mind in 1953 and later when they put through the aforesaid transactions. We have	 therefore	 to hold that the factual requisites of section 52 have not been established here". In dealing with the second Company	 namely	 A.C.C.I it was pointed out by the Tribunal that the scheme for manufactur ing Polythene was placed before the Government of India by a letter of the assessee dated 13 12 1955 addressed to Mr. H. V. R. lengar	 Secretary	 Minister of Commerce & Industry	 in which it was specifically stated that to enable the assessee to subscribe for the new shares I.C.I. would lend the subscription monies to the assessee on the understanding that at a later date I.C.I. could acquire at the issue price these new shares in satisfaction of its 145 loan. The Tribunal dealt with all the relevant facts relating to the loan advanced to A.C.C.I. including those stated in the affidavits of P. T. Manzies dated 17 8 1966 and U. R. Newbery dated 10 1 1967 and considered that the transaction relating to this Company was not in any way different from those relating to the I.P. L. ATIC	 the third Company was incorporated primarily for the manufacture of certain Dye stuffs. On 29 12 1955 I.C.I. agreed to advance Rs. 25 lakhs as loan to the assessee. The shares acquired under the loan could be transferred to I.C.I. on request by the latter at the issue price. I.C.I. waived its right to interest on the loan until the commencement of the period in respect of which ATIC paid the dividend. There was a further loan of Rs. 35	00	000 on the same terms. These shares were age subsequently required to be transferred to I.C.I. in February 1961. The Appellate Assistant Commissioner had referred to the affidavits which had been filed on behalf of the assessee and had mentioned that the Department had not cross examined the deponents. Before the Tribunal the counsel for the Department stated that he accepted the affidavits as correct in so far as facts were concerned but he only disputed the inferences therefrom. The Tribunal in this connection observed: "In our opinion	 once the facts mentioned therein are taken as correct	 the inference that the transaction was not for *he purpose of avoiding or reducing liability to capital gains tax has to follow". Finally the Tribunal	 as stated before	 confirmed the decision of the Appellate Assistant Commissioner that the material on record did not justify the conclusion of the Income tax Officer that the object of the transfer of the shares of all the three Companies by the assessee to I.C.I. was the avoidance of liability to capital gains which would attract the applicability of section 52 of the Act. The Commissioner of Income tax asked for a reference on six questions. The Tribunal again examined the further contentions of the Department in its order dated 28 7 1969 by which it declined to make the reference on the ground that no question of law arose out of the order of the Appellate Tribunal	 Only four questions appear to have been pressed for being referred. As regards question No. 1 (which was No. 3 before the Tribunal) it was pointed out that it proceeded on the basis that there was some dispute about the construction of the correspondence or documents. The Tribunal observed that there was no such dispute and it had not been suggested that a particular expression in any letter or document had been wrongly construed. Regarding question No. 2 (which was No. 4 before the Tribunal)	 the Departmental representative was asked to particularise the docu 146 ments or evidence omitted from consideration. He referred to certain documents and evidence which according to him had not been considered by the Tribunal. The Tribunal made it cleat that all the relevant materials which had been referred to had been considered by it. These materials were distributed over four bulky volumes of typed records and	 therefore	 each document could not have been mentioned in the order. Nothing relevant was actually over looked. At any rate the documents on which particular reliance was placed on behalf of the Department were considered and the Tribunal observed that the grievance of omission of materials from consideration related to irrelevant matters. As regards (the other two questions	 the Tribunal observed that the charge of perversity was only a disparate attempt at extracting a question of law where	 none existed and that the object or intention of an assessee was always a question of fact. It was a factual inference to be drawn from other facts. It was pointed out that on the construction of section 52	 the parties had not joined	 any issue. We may now mention the four questions which the High Court directed to be referred : 1. "whether on the facts and in +he circumstances of the case and on a proper construction of the documents referred to and/or considered by it the Tribunal was right in arriving at the finding that the transfer of the shares to Imperial Chemical Industries Ltd.	 London at the issue price or par was throughout the basis of the advance of loans to the assessee ? 2. Whether	 in arriving at the said finding the Tribunal misdirected itself in law in basing the said finding on evidence covering some matters only and ignoring	 evidence on other essential matters ? 3. Whether	 on the facts and in +	he circumstances of the case and particularly in view of the finding that there was no enforceable agreement making it obligatory upon the assessee to transfer the shares to Imperial Chemical Industries Ltd.	 London	 at par or issue price the conclusion of the Tribunal that the transfer of the shares by the assessee to the latter company at par was not effected with the object of avoidance or reduction of the liability of the assessee to capital gains tax was unreasonable or perverse ? 4. Whether	 on the facts and in the circumstances of the case	 the Tribunal was right in holding	 that 147 section 52 of the Income tax Act	 1961	 was not applicable to the facts of the case ? On the analysis of section 52 of the Act made by us at a previous stage and the clear	 cogent and precise findings and conclusions of the Appellate Tribunal	 we are wholly unable to comprehend	 how any question of law of the nature sought to be referred arose; or arises from the order of the Appellate Tribunal. It is unfortunate that in a case of this nature and magnitude	 the High Court did not choose to record a speaking order to enable us to appreciate the reasons which prevailed with it for directing the four questions to be referred. The jurisdiction in the matter of reference can be exercised (i) when the point for determina tion is a pure question of law such 'as construction of a statute or document of title; (ii) when the point for determination is a mixed question of law and fact. While the finding of the Tribunal on the facts is final its decision as to the legal effect of those findings is a question of law	 (iii) a finding on a question of fact is open to attack as erroneous in law when there is no evidence to support it or if it is perverse. Where	 however	 the finding is one of fact	 the fact that it is an inference from other basic facts will not alter its character as one of fact (See Sree Meenakashi Mills Ltd. vs	 Commissioner of Income tax	 Madras(1). In that case it was held that there was no question of construction of any statutory provision or document of title. The issues which arose for determination	 whether the sales entered in books of the ap pellant in the names of the intermediaries were genuine	 and if not	 to whom the goods were sold 'and for what price	 were all questions of fact. Their determination did not involve the application of any legal principles to facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It	 therefore	 followed that there was no question which could be referred to the Court under section 66(1) of the Income tax Act 1922. The same principles will apply when a reference is sought under section 256 of the Act. We are altogether unable to see how findings of the Appellate Tribunal that the transfer of shares in the present case was not made with the intention or object of avoidance or reduction of liability to capital gains were not questions of fact and did not depend on inference of facts from the evidence or the material before the Tribunal. It can well be said that the determination of the question whether the object of the assessee was to avoid or reduce its liability to capital gains by making the transfers in question did not involve the application of any legal principles to the facts established by the evidence. The findings of the Tribunal were amply supported by evidence and were eminently reasonable. It (1) 148 is true that the amount involved is very large but that cannot Justify a reference as under section 256 of the Act neither the Appellate Tribunal could make a reference nor could the High Court direct the reference to be made to it by the Tribunal on pure questions 	of fact. The learned counsel for the Commissioner has sought to invite our attention to certain parts of the order of the Tribunal and	 in particular	 to the statement extracted by us at an earlier stage about the question whether the assessee had held the shares beneficially and the point which was debated before the Tribunal whether there was any binding legal agreement between the assessee and I.C.I. for transfer of the shares at par. We are unable to see how these matters were relevant for the purpose of determining the intention or object under lying the transfer of the shares to I.C.I. by the assessee. Once the Tribunal came to the conclusion which was purely one of fact that before there was any proposal to reimpose capital gains tax which came to be embodied in the Finance Bill towards the end of November 1956	 the scheme had been fully evolved between the assessee and I.C.I. of making the loans by the latter to the former for being invested in the three companies and that the shares would be transferred at par by the assessee to I.C.I. whenever desired	 the applicability of section 52 could not be attracted as the same depended on certain facts which must exist or must be found and which had not been so found by the Tribunal. In the result the appeal is allowed and the order of the High 	Court is hereby set aside. The assessee shall be entitled to its costs in this Court. V.P.S. Appeal allowed.

After negotiations in 1953 with the concerned Department of the Government of India and the Reserve Bank	 a Company	 incorporated in U.K. advanced large sums by way of loans to its subsidiary in India	 namely the assessee	 for subscribing for shares in some Indian Companies. The correspondence showed that the U.K. Company had the right to acquire at any time the shares at par	 in satisfaction of the loans. In 1961	 the assessee transferred the shares when called upon by the U.K. Company to do so. The Income tax Officer applied section 52 of the Income tax Act	 1961	 and assessed the assessee to capital gains tax	 which was not in existence in 1953 but was Reintroduced in the Finance Bill of 1959. The Income tax Officer held that the object of the transfer was to avoid or reduce the assessee 's liability to capital gains tax. The Appellate Assistant Commissioner however	 held that the assessee was not liable to capital gains tax	 and the Appellate Tribunal	 after an elaborate discussion of the correspondence	 confirmed the order	 holding that the transfer was not effected with that object. The Department applied to the Tribunal to refer the questions	 (i) whether certain documents were not properly construed	 (ii) whether the Tribunal ignored evidence on essential matters	 (iii) whether the finding of the Tribunal was perverse	 and (iv) whether section 52 was not applicable	 as arising out the Tribunal 's order. The Tribunal rejected the application. The Department then moved the High Court and the High Court directed the Tribunal to state a case in relation to the four questions	 but the High Court did not give any reasons for doing so. Allowing the appeal to this Court	 HELD : The High Court can exercise its jurisdiction in the matter of reference	 (a) when the point for determination is a pure question of law	 such as	 the construction of a statute or a document of title; (b) when the point for determination is a mixed question of law and fact (While the findings of the Tribunal on the facts are final	 its decision as to the legal effect of the findings is a question of law. Where	 however	 the finding is one of fact	 the fact that it is an inference from other basic facts will not alter its character as one of fact); and (c) when a finding on a question of fact is perverse. [147C E] The necessary ingredients of section 52 are : (i) there should be a direct or indirect connection between the person who acquires a capital asset and the assesee; (ii) the income tax officer should have reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee to capital gains; and (iii) if the first two conditions 139 are satisfied then the full value of consideration for the transfer may be taken to be the fair market value of the capital asset on the date of the transfer. The intention with which a particular transfer is made and the object which is to be achieved by such transfer are essentially questions of fact	 the conclusion relating to which	 are to be arrived at on a consideration of relevant material; that is	 before the income tax officer can have any reason to believe that a transfer was effected with the object mentioned in the section facts	 must exist showing that the object was to avoid or reduce the liability to capital gains. [141 H; 142 A D] In the present ease	 the orders of the Tribunal show that there was no dispute as to the construction of any expression in any letter or document	 that no relevant evidence was overlooked	 that the inference was drawn from other facts and	 that no question was raised on the construction of section 52. When the Tribunal found	 as a fact	 that before there was any proposal to reimpose the capital gains tax which had remained abolished for some time	 the scheme between the assessee and the U.K. Company bad been fully evolved	 the applicability of section 52 could not be attracted. The findings of the Tribunal that the object mentioned in the section could not be held to be established from the mere absence of a formal agreement between the assessee and the U.K. Company	 is not perverse	 but is supported by evidence and is eminently reasonable. in view of the clear	 cogent and precise findings and conclusions of the Tribunal	 the High Court	 should at least have recorded a speaking order showing how the questions of law of the nature sought to be referred arose from the order of the Tribunal. [146 B D; 141 A C	 F; 148 C.D] Shree Meenakshi Mills Ltd. vs C.I.T.	 Madras	 	 followed.