1. - The Income-tax Appellate Tribunal has referred the following questions of law arising out of its order dated February 29, 1980, in respect of the assessment year 1976-77 under section 256(1) of the Income-tax Act, 1961 :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that a ginning factory is not a new industrial undertaking and as such not entitled to the deduction under section 80J of the Income-tax Act, 1961, on the capital employed ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that expenditure incurred on customers is an entertainment expenditure ?"

2. The brief facts of the case are that the assessee derives its income from purchase of cotton and sale of cotton and cotton seeds which is obtained after ginning of the same in its factory at Bali. A claim under section 80J/80HH was made in the revised return submitted by the assessee. The Income-tax Officer found that the assessee's capital at the beginning of the accounting year was Rs. 32,381 against his capital with Surendra Finance Co., of Rs. 55,921. The Income-tax Officer came to the conclusion that the