S.S.Sandhawalia, J.

1. This set of income-tax references at the instance of both the revenue and the assessee raises certain interesting questions of interpretation. As common questions of law and fact arise, I propose to dispose of them by this single judgment.

2. These references pertain to two assessment years 1964-65 and 1965-66 of the assessee, M/s. Saraswati Industrial Syndicate Ltd., Yamunanagar, for which the respective accounting periods ended on the 31st of August 1963, and the 31st of August, 1964. In the relevant statements of the case, as many as nine questions in all have been framed, but I propose to deviate from the serial order therein and first take up the two questions at the instance of the revenue.

3. M/s. Saraswati Industrial Syndicate Ltd. is a company carrying on the business of manufacture and sale of sugar and machinery for sugar mills and other industries. During July, 1963, its managing director visited Japan in connection with the companys business. A deduction of Rs. 11,922 on account of expenses was hence claimed by the company. The ITO disallowed the companys claim primarily on the ground that this expense was of a capital nature because the