SETHURAMAN J.

Under s. 256(1) of the I.T. Act, 1961, the following questions have been referred

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to the deduction of the loss of Rs. 23, 394 for the assessment year 1968-69 ?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee acquired a right to the capital asset and the assessee's right in the capital asset was subsequently extinguished ?

(3) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal had valid materials to hold that the alleged loss suffered by Shri Damodara Mudaliar was on behalf of the assessee-firm ?" *

The assessee is a partnership firm consisting of Shri Damodara Mudaliar and Smt. T. Krishnaraj. Damodara Mudaliar entered into a "lease agreement" with the Government of Tamil Nadu to take on "lease" a developed plot in the Ambattur Estate for setting up a factory for manufacture of taps, dies, reamers, etc. He was, it was claimed, acting on behalf of the firm in this venture. A sum of Rs. 85, 040 was paid to the Governm