( 1 ) THIS is a reference under Section 256 (1) of the Income-tax Act, 1961, wherein two questions were referred to this court by the Income-tax Appellate Tribunal. The facts of the case are that the assessee filed its return in respect of the assessment year 1989-90. The assessee is a limited company and the method of accounting is the mercantile system. The assessment, by the authority concerned, was made under Section 143 (3) of the Income-tax Act, 1961. The Assessing Officer did not entertain the claim of the assessee in respect of certain items amongst which the disallowance of deduction claimed under Section 32ab of the Income-tax Act, 1961, and the disallowance of Rs. 5,93,126 under Section 37 (2a) of the Income-tax Act, 1961, are relevant so far as the present hearing is concerned. Being aggrieved by the decision of the Assessing Officer in respect of those two items, the assessee preferred appeal before the Commissioner of Income-tax (Appeals) and thereafter the matter finally came before the learned Income-tax Appellate Tribunal for decision. The learned Tribunal allowed Rs. 78,135 in favour of the asses-see-company treating it as expenditure for