( 1 ) THE Tribunal, Delhi, has referred the following two questions of law under Section 256 (1) of the IT Act, 1961 (hereinafter referred to as the act), for opinion of this Court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the trading loss of embezzlement was not allowable during the previous year ending on 31st Dec, 1977, relevant to the asst. yr. 1978-79 ? 2. Whether, on the facts and in the circumstances of the case, the. Tribunal was justified in law in upholding the disallowance of Rs. 11,474 under Section 80vv ?"

( 2 ) BRIEFLY stated, the facts giving rise to the present reference are as follows : the present reference relates to the asst. yr. 1978-79. The applicant is a firm deriving income from the running of oil mill, Khandsari business and the running of ice and cold storage plant. It maintains its account on calendar year basis. For its business, it maintains depots at various places including Calcutta, Cuttack and Haldwani. At Haldwani, the depot is utilized both as sales outlet and as purchasing agency. The depot is in the charge of a manager, assistant manager and an accountant. So