Concept:
Amarasiṃha, author of the famous Sanskrit lexicon Amarakoṣa, is traditionally regarded as a Buddhist scholar. Internal literary evidence from his text supports this conclusion.
Step 1: Analyzing the arrangement of deities in Amarakoṣa.
A. Buddha's names are listed before the Tridevas.
In the opening sections of the Amarakoṣa, the synonyms of Buddha are presented before those of Brahmā, Viṣṇu, and Śiva. Such ordering indicates reverence and suggests Amarasiṃha's Buddhist affiliation.
Step 2: Studying the invocation verses.
C. Buddha praised as Dayāsindhu.
The introductory verses praise the enlightened being as an “Ocean of Compassion” (Dayāsindhu) and “Omniscient” (Sarvajña), titles commonly associated with the Buddha.
Step 3: Rejecting the incorrect statements.
• B. No narration of Vedic Gods --- Incorrect because Amarakoṣa includes extensive references to Vedic and Purāṇic deities.
• D. Has not narrated Mahābhārata --- This is irrelevant because Amarakoṣa is a lexicon, not an epic narrative.
• E. Analysis of Pali grammar --- Amarasiṃha worked in Sanskrit literature, not Pali grammar.
Step 4: Final Conclusion.
The strongest evidence for Amarasiṃha's Buddhist identity is:
\[
\boxed{A \text{ and } C}
\]
Thus, Option (2) is correct.