1. On an application filed under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the

following question for our opinion: “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the assessee’s claim for writing off of the sum of Rs. 52,489 and litigation expenses at Rs. 12,000 ?”

2. During the assessment year 1979-80, the Assessing Officer noticed that a sum of Rs. 52,489 was written off on account of advance made to the agriculturist for purchase of agricultural land. The intention of the assessee, of course, was to acquire the land to set up a boiler factory, but ultimately that did not materialise. The agriculturist refused to refund the amount. The asses-see filed a civil suit in the Court, where the assessee lost its claim. Then the assessee had written off that amount in the books of account and claimed deduction on the incurred amount as revenue loss. The Assessing Officer rejected his claim. According to the Assessing Officer when the amount was advanced for acquiring the capital asset, the written off amount cannot be allowed as deduction in the income of the assessee.

3. In appealbefore the Com