( 1 ) THE facts found and/or admitted in this reference are of short compass. Some time in 1951, Messrs. Rohtas Industries Ltd. of Dalmia-nagar, the assessee, purchased from M/s. Escher Wyss of West Germany, a paper making machine. On installation it was discovered that the machine was defective and that its output was below the guaranteed figure.

( 2 ) THEREUPON, correspondence ensued between the assessee and the German firm. By its letter dated the 17th December, 1953, the assessee complained that the machine in its best condition was not producing more than 12 tons in 24 hours though the guaranteed production was 20 tons in 24 hours. This letter was followed by a telegram from the assessee reiterating the complaint. The assessee also asked for free and immediate supply of parts of the machine. The German firm by their letter dated the 10th January, 1955, undertook to supply free certain parts of a specified value. In spite of the replacement of the parts, the output of the machine did not increase. By their letter dated the 17th September, 1956, the German firm admitted that there was complaint of low output. Finally, by its letter dated the 7th July, 1958, the German