KAPUR, J.

1. This is a reference made by the Income-tax Appellate Tribunal and the two questions which have been referred to this Court are :-

" (1) Whether there was material upon which the Tribunal found that the assessee attempted to extract more rosin by contravening the terms of the lease?

(2) If so, whether, upon the facts found by the Tribunal found that "the assessee as fine under the penalty clause of the terms of the lease was a proper deduction within the meaning of Section 10 (2) (xv) of the Indian Income-tax Act, 1922? "

In order to answer these questions it is necessary to briefly give the facts of the case as given in the statement of the case by the Tribunal. An agreement, exhibit H. was entered into between the Tehri Garhwal State and the assessee, the Himalaya Rosin-Turpentine Manufacturing Company on the 24th November, 1937, which was to take effect from the 1st of Dec., 1937. The clause of this agreement relevant to the present case is No. II which is follows :-

"II. That you will be responsible to extract rosin according to the specifications and prescription prescribed in the standard books on the subject as is described in the schedule enclosed herewi