(Per T. D. Sugla, J.)

In this departmental reference relating to the assessee's assessment for the assessment year 1968-69, the Income-tax Appellate Tribunal has referred to this Court two questions of law under section 256(1) of the Income-tax Act, 1961. The questions read thus :

"(1) Whether, on the facts and in the circumstances of the case, the compensation amount of Rs. 35,504 paid by the assessee to M/s. Radia and Sons (Pvt.) Ltd. is deductible in computing the capital gains arising on sale of the plot of land under section 45 of the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the assessee was rightly allowed by the Tribunal to exercise the option of substituting the fair market value of the plot of land as on January 1, 1954 for the actual cost thereof as contemplated under section 55(2) of the Income-tax Act, 1961, in computing the capital gains arising on sale of the plot under section 45 of the Income-tax Act, 1961 ?"

The assessee had purchased a plot of land admeasuring 5,072 sq. yards at Borivli in the year 1948 for Rs. 15,774. On August 2, 1963, the assessee entered into an agreement for sale of the said property with