Judgment Bhargava, J.-This is a reference under Section 256(1) of the I.T. Act, 1961. Following two questions of law have been referred for opinion of this Court by the Income tax Appellate Tribunal, Jaipur Bench:

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the word ‘expenditure’ as used in Sub-section (3) of Section 40A would include the cost of purchasing the goods meant for resale?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee was not entitled to exemption under Clause (f) or Clause (j) of Rule 6DD in respect of the payment regarding the purchase of the goods from other traders?

2. The assessee-firm is carrying on business of commission agency and kirana goods at Ramganj Mandi. The assessee-firm purchased “dhania” goods and out of the total purchases, those paid for in cash in excess of Rs. 2,500 between April 1, 1969, to June 2, 1969, amounted to Rs. 41,922. According to the ITO, such payments were caught within the mischief of sub Section (3) of Section 40A of the I.T. Act, 1961 (hereinafter to be referred to as “the Act”), which was inserted from April

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