M.HIDAYATULLAH, J.

(1) THIS appeal by the Commissioner of Income- tax, Mysore, on a certificate granted under a. 66A of the Indian Income-tax Act, is directed against a judgment of the High court of Mysore dated September 7, 1959, by which the following question referred by the Income-tax Appellate tribunal, Madras bench, was answered in favour of the respondent : `Whether there are materials for the tribunal to hold that the sum of Rs. 2,87,422.00 aforesaid represents a loss of capital.` Originally two question were referred, but with the second question we are not now concerned. The respondent is a limited liability Company called the Mysore Sugar Co. Ltd., in which a very large percentage of shares is owned by the government of Mysore. We shall refer to the respondent as the assessee Company.

(2) THE asseesee Company purchases sugarcane from the sugarcane,growers, and crashes them in its factory to prepare sugar. As a part of its business operations, it enters into agreement with the sugarcane growers, who are known locally as `Oppigddars` and advances them sugarcane seedlings, fertilisers and also cash. The Oppigedars enter into a written agreement called the `Opp