ACIT, CIRCLE - 41, KOLKATA, KOLKATA vs. M/S. ANMOL TEXTILES,, KOLKATA

M/s N.M.Exports Shri Anil Kumar Saroagi 25% Shri Bijay Saroagi 25% Shri Amit Saroagi 25% Shri Sandeep Saroagi 25% Thus there are common partners in both the concerns except Shri Bijay Saroagi who is the father of other partners. He observed that M/s N.M.Exports which is engaged in the manufacturing of garments, the other unit of which (M/s Mahadev Fabrics) is engaged in dyeing of fabrics at JL-2, Sankrail Industrial Park, Dhulagori, Howrah. The assessee has made all the purchases of T-Shirts from M/s N.M.Exports in pieces and made exports thereof after putting tags etc on the T-Shirts which is being claimed as a manufacturing process for the claim of 100% deduction u/s 10B of the Act. Accordingly, the ld AO observed that the assessee is not the manufacturer of readymade garments and rather it is the sister concern which is engaged in the manufacturing activity and claiming deduction u/s 80IB of the Act. The ld AO observed that the assessee had shown the following expenses in its accounts :-

Purchase of T-Shirts (1095751 pieces) - Rs 17,93,40,497/- Design Development Charges - Rs 22,45,902/- Labour Charges - Rs 37,08,554/- Oil and Fuel Expenses - Rs 7,59,231/- Packing Materials - Rs 47,92,405/- Salary and Bonus - Rs 2,93,000/- Wages - Rs 5,21,858/- Based on the aforesaid observations , the ld AO concluded that the assessee is not engaged in any manufacturing activity and hence not eligible for deduction u/s 10B of 3

“I have examined the submissions made by the Ld. AR , the findings of the AO in the assessment order, perused the facts of the case .and other materials brought on record.

As regards to Whether assessee' '''ad due infrastructure to carry out the manufacturing, the Ld. AR discussed with me about a general allegation made by the AO that assessee has not carried out manufacturing as it has not possessed any machineries to carry out the production process except few machines. He mentioned that the appellant enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Falta Exports Processing Zone, Ministry of Commerce & Industry, Govt. of India and had obtained approval from the F.E.P.Z. Authorities to set up an undertaking for manufacture of goods. The same authority had renewed the approval in terms of clause 6.9 of the Foreign Trade Policy Oh satisfying the basic compliances regarding manufacturing and exporting. He also elaborated the production process as was stated in the Project Report submitted to the FEPZ Authorities and their relation with the machineries installed in the factory. He further mentioned that the requirement of machines were related to the nature of the product and since the appellant was in the business of fashioned garments requiring high degree of soft skill, the unit was not machine intensive.

I have gone through the submissions of the Ld. AR. It is observed that even the assessment order acknowledges the fact of existence of machines. Now if the machines were identified with the declared and approved production process, I find no reason to accept the point that there was no machine or to disbelieve that the machines were insufficient to carry out the production.

With regards to Whether the assessee was only buying raw material from NME or buying the finished goods manufactured by NME, it is submitted that in several places of the assessment order, it was narrated that the main manufacturing of the product was done at the assessee's parent unit. On the other hand, the Ld. AR stressed on the point that assessee has carried out the due manufacturing process at its bonded warehouse. The bonded warehouse was a declared station under the Customs Law functioning under the physical supervision of the Cost Recovery Officer (CRO) appointed under the said law. Further, the place was registered with the Central Excise Department for carrying out manufacturing(Stock registers were maintained showing date wise receipts and issues of raw material, daily production and sales of finished goods and stock balance at the end of the day. Monthly returns under the Central 4

5 M/s Anmol Textiles A.Yr.2011-12 Excise Laws were submitted showing details of manufacturing and removals. The Cost Recovery Officer, under whose physical supervision the movement of goods were carried out had never raised any issue regarding manufacturing. The Central Excise Records and Returns, containing items manufactured & dispatched were also accepted by the Central Excise Department. The same was also confirmed from the financial accounts and basic accounting records like purchase bill, payment voucher, sale bill Nothing was mentioned in the Tax Audit Report regarding violation of arm's length pricing for purchase of inputs from parent concern. ' On the other hand, the Ld. AR had pointed out that the assessment order itself had mentioned about carrying out manufacturing process like design development, pressing and incurring manufacturing expenses like labour payments, cost of diesel, electricity, packing materials etc.

I have considered the issues raised in the assessment order regarding running of the undertaking by the appellant as an independent units and the rebuttals made by the appellant. The AO has not brought any material on record to show that the appellant had been doing nothing and its parent had actually carried out the manufacturing process even relevant for the assessee. In the absence of any material. It cannot be held that claim of certain process carried out by the appellant was a smoke screen and it was only its parent which carried out everything· As regards to Whether making design development, embroidery, fixing accessories, final sewing, Industrial pressing, testing, packing, labelling can be called manufacturing process, It is seen that this is the most crucial and relevant aspect of entire discussion. While explaining the production process, the Ld. ,AR had stated that the appellant had at the first stage needs to develop the design of the ladies T-shirt, approved the same from the overseas customers, selected the fabrics, developed the prototype and ordered its parent unit to supply the stitched and cut fabrics as per the sample. Such inputs would undergo hand embroidery, stone fixing, embossing, neck printing and various stages of finishing process viz. steaming, ironing and folding, buttoning, poly bag filling, labelling, tagging and final packing in the cartons for export. As held above, what was done at NME was an intermediate stage. It was a manufacturing process in itself and who! is done at ANMOL is the final stage and it has to be. seen whether appellant's activity also falls under the legal definition of manufacturing. I have observed tr-ot while appellant had cited a number of authorities in respect of his arguments as to what should be manufacture and how this is complied with by him, AO has declined to accept the logic. Before applying the principles laid down in those authorities, an analysis is required to understand the exact nature of processing done by the appellant.

5.2.10 Now, I consider how the Courts have dealt with the subject 'manufacturing'. (i)ITAT (Chennai) in Vinbros and Co. vs. ITO (2008) 297 ITR(AT) 280 held that where after carrying on process, a different commodity emerges it would be a manufacture. In that case the issue was whether undertaking was carrying out any manufacture or production of any article or things for the purpose of deduction u/s 80IB.The raw 5

6 M/s Anmol Textiles A.Yr.2011-12 material used was rectified spirit and what were manufactured were bear, wine and other alcoholic spirits. It was held that the end product was quite different than the rectified spirit which was converted into bear, wine and other alcoholic spirits even though basically they would be alcoholic. The raw material including rectified spirit are not fit for consumption human being but the end product being IMFL potable and is so recognized in the trade.

(ii) In CIT vs. Jamal Photo Industries (I) Pvt. Ltd. (2006) 285 ITR 209 (Mad) the Hon’ble Madras High Court held that the expression manufacture involves the concept of changes affected to a basic raw material resulting in the emergence of a finished products into a new commercial commodity. It is not necessary that original article or material should have lost its identity completely. All that is required is to find out whether as result of operation /process carried out, a totally different commodity has been produced having its own name, identity and character or end use. In that case, the assessee used negative films and exposed them into printed positive photos. The assessee was held as involved in manufacturing activities as the final photos were different than the original or negative.- ..

(iii) In CIT vs. Darshak Ltd. (2001) 2471TR 489 (Kar) the Hon'ble Karnataka High Court held that manufacture would imply a change and transformation. A new and different article must emerge having a distinct and different character and use. In that case the assessee was transforming the blank glassware into decorative glassware with process which was irreversible and end product was distinct and different in character. It was marketed as a commodity different from plain glass. The assessee was held to be entitled to the benefit of section 80I.

(iv) In CIT vs. Sterling Foods (Goa) (1995) 213 ITR 851 (Bom) Hon'ble Bombay High Court held that the three expressions namely processing, 'manufacture and production used in various taxing statutes which are not interchangeable expressions. They are often used in juxtaposition. But they convey different concepts and refer to different . activities. Processing is much wider concept. Every process does not amount to manufacture. It is only when process results into the emergence of a new and different article having distinctive name, character and use that "manufacturing" can be said to have taken place. Similarly production is wider than manufacture. (v) In Indian Cine Agencies vs. CIT (2009) 308 ITR 98 (SC) Hon'ble Supreme Court considered the case of an assessee who converted jumborolls of photography films into small flats and rolls in desired sizes. It was held that it amounted to manufacture or production for the purpose of allowances u/s 32AB, 80 HH and 80 I of the Act.

(vi) In CIT vs. Prabhudas Kishordas tobacco Products P. Ltd. (2006) 2821TR 568 (Guj) Hon'ble Gujarat High Court considered the case of a tobacco declerwho was buying tendu leaves and tobacco. Assessee had hired contract workers who rolled the leaves into bidis which was sold under its brand name. It was held that tendu leaves and tobacco which were used as inputs do not retain their independent identity after the 7 M/s Anmol Textiles A.Yr.2011-12 bidis are produced after undergoing various processes. Commercially the final product is known as different commodity and has a separate market. It was held that the assessee was engaged in manufacturing of bidis entitled to deduction u/s80 HH & 801.

(vii)The concept of manufacture was further explained by Hon'ble Supreme Court in CIT vs. Oracle Software India Ltd. (2010) 320 ITR 546(SC) where it was held that after operation/process rendered a commodity fit for use for which it would otherwise not be fit, the operation or the process would fall within the meaning of the word manufacture. In that case, the assessee was undertaking an operation which rendered the blank CD fit for use for the purpose for which it would otherwise not be fit. The blank CD was an input. By duplicating the process undertaken by the assessee, the recordable media or the programmes were embedded therein from master-media and thus blank CD was converted into recorded CD by such an integrated process. The duplicating process changed the basic character of a blank CD which became marketable for a specific use. Without such processing, blank COs would be not fit for their intended purposes, It was held that it would amount to manufacture in terms of section 80IA r. w. Sec 33B.

5.2.11 While discussing the undisputed facts, I have seen that department has accepted the position that few processes like design development, pressing, fixing, accessories, packing, testing etc. were actually done' by the unit. It is my considered view that the sequence of process from purchasing of fabrics, cutting, stitching, testing and packing are part of entire process in the manufacturing of raw T-shirts. A combination of few processes may become manufacturing of intermediate product but for that matter combination of the rest of the processes, namely doing embroidery and embossing, putting accessories, steam pressing, folding, packing and quality checking cannot be held as not forming manufacturing process.

In manufacturing of a final product there can be several intermediate stages, different commodities are formed at intermediate stage. They could be manufacturing process by themselves. These intermediate products can have their independent identity and marketability. Accordingly, the cut and stitched items will fall under finished product for the parent on whose basis it can claim deduction u/s 80IB. However, so far as the appellant is concerned the cut & stitched fabrics are definitely the desired raw material to manufacture fashioned T-shirt having acceptability in the export market. Therefore, the claim of the appellant that it purchased raw material and manufactured finished product by the relevant process cannot be rejected unless it is established by the AO by cogent evidences that aI/ the activities by appellant were only a smoke screen. Further, it is well known that finished product of one unit can be the raw material of another. Since it was not a case and books of accounts the appellant are accepted then the observation by the AO that the assessee is buying a semi finished goods from its parent. cannot alter the situation and the process undertaken being satisfying the basic test of manufacture i.e. production of commercially new goods, there is no material in record to negate exemption u/s 10B. The process that the appellant had undertaken. clearly points out the irreversible nature of the final end product from a raw material purchased and given the above said fact. I agree with the contention of the appellant that there was, in fact, 'manufacture'. 7 Hence, I agree with the contention of the appellant in this regard drawing support from the decision of the Apex Court reported in Aspinwall & Co. Ltd. [2001] 251 ITR 323/118 Taxman 771 (SC) that the word 'manufacture' has to be understood in common parlance. In the decision reported in Aspinwall & Co. Ltd. (supra), the Apex Court observed "It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article 'then it would amount to manufacturing activity". Thus the Apex Court pointec out that if the commodity can no longer be regarded as the original commodity but instead is recognized as a new and distinct article, then the activity of manufacture can be said to take place. Given the admitted fact that what was purchased by the appellant as raw material and what was exported as finished goods are totally different items and commercially known as a different product, I am in agreement with the contention. I also agree with the pleading made by learned counsel that while the raw material i.e. the raw T-shirt has no market in the retail outfit, the fashioned T-shirt has so and therefore both the items are commercially known as different products in different market segments. The issue that how both the entities i.e.· the appellant and its parent are claiming deduction for manufacture of the same item, is of no relevance as the appellant has rightly pointed out that the finished product of one concern can be raw material for the other and both shall be qualified to be manufacturer in their respective product.

Moreover, I also notice that the appellant, a foreign exchange earner, as an EOU is required to carry out manufacturing activity and on its DTA sales, following the Central Excise laws, is also required to pay excise duty. It would be a dichotomy if on the same activity the appellant were to pay excise duty on the ground that the same amounted to manufacturing activity but would be declined deduction under the Income Tax Act on the ground that the same did not. In this context, in the case of ITO vs. Arihant Tiles and Marbles P. Ltd. [2010] 320 ITR 79 (Se)' the Supreme Court had observed as under:-

“23. Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken. by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80/A of the Income Tax Act, 1961." 8 5.2.12 Whether the appellant ,ANMOL TEXTILES was formed by splitting NM Exports The Ld. AR has explained about formation of the 100% EOU and placed all documents like the LOP of the unit issued by Development Commissioner, renewal of the same, approval of the change of name and address. constitution of the firm and details of partners, PAN card of the firm for the undertaking etc. The Ld. AR reiterated that the undertaking was formed with the name of N M Exports-EOU and granted approval. The name was subsequently changed to Anmol Textiles having the same partners with continuance of assessment with the same PAN. In fact I find that in the. assessment order dated 28.12.2007 passed u/s 143(3) of the Act for AY 2005-2006 the then AO has mentioned the name of the assessee as N M Exports EOU renamed As M/s Anmol Textile" Thus the department was having full knowledge of change of name since 2007. I have examined the documents and accepted the viewpoint that mere change of name without reconstitution would not affect the eligibility of the undertaking which is further strengthened by the fact that the Development Commissioner of the EPZ; Falta had also allowed renewal of the approval even after the name change .. On the other hone the AO has not brought on record any material leading to an evidence of splitting-up of process or business. Accordingly, I am unable to accept the view point of the AO in this regard. 5.2.13 Whether any new fact is established from survey operation.

From the assessment proceedings, it is noted that the Department had carried out a survey operation in appellant's premises on 18th September 2013 mainly on two aspects: whether the unit has been engaged in the manufacturing of articles or things as its own and whether the unit has been formed by the splitting up, or the reconstruction, of a business already in existence. Survey is an important tool to understand the truth in respect of any aspect. But mere survey cannot be much help if the same is not carried out in a proper manner considering the perspectives. It was on record that the undertaking stopped manufacturing since 1st April 2011. The survey was conducted on 13th September 2013 i.e. after a period of more than two years. Naturally the effort is not expected to produce the desired result. Further no cogent evidence, as a fall-out of survey operation, has been brought on record by the AO about both the vital aspects to determine eligibility of exemption u/s 80B. The references made by the AO in respect of survey about usage of same business premises, change of address: knowledge of workers etc. are little relevance. The documents placed by the AR revealed that aspects like presence of its parent concern in the same line of business or 100% procurement from parent or change of name from NM Exports-EOU to Anmol Textiles were all disclosed in the past assessments. Accordingly, considering all these factors, I am unable to accept AO's contention that through survey only. new facts were gathered which 5.2.14 Whether principle of consistency has any significance From the documents submitted by the Ld. AR, it is found that the appellant was under scrutiny assessment from AY 2004-05 to 2009-10 and no questions regarding its eligibility to get exemption u/s 10B of the Act were enquired into. He also placed the assessment order made u/s 143(3) for the AY 2010-11 where the specific issue of compliance of the provisions u/s 10B was examined as to whether any value addition was being done by the assessee in manufacturing T- shirts after purchase of the same from the sister concern M/s NM Exports keeping in view the fact that M/s NM Exports has also claiming deduction u/s 80IB(3) as a manufacturing concern and the AO, after allowing exemption u/s 10B, accepted the returned income as such. The Ld. AR mentioned a settled proposition as held in the case of Sharda Export Vs. JClT [2014] 147 ITD/ 183/ [2013] 36 taxmann.com 357 (Delhi Tri.) that the eligibility for deduction under section 10B is to be examined in the first year of allowabilty and not thereafter. In this context. reliance was also placed on the decision in case of DCIT Vs. Tyco Valves & Control India P. Ltd [2013] 57 SOT 138(URO)(Ahd. Tri.) In the light of above discussion & findings and considering the entire facts of the case, I am of the view that the AO was not justified in rejecting the claim of deduction u/s 10B. I have also gone through the associated issues raised by the AO and the corresponding rebuttal made by the Ld. AR in the written submission. Considering the detailed and complete explanation of the same, I fully agree with the submission put forward for each specific point. Further the facts of the case are identical with the facts of the case before the Hon'ble Calcutta High Court in the case of CIT, Kol. Vs. Ektara Exports Pvt. Ltd, 2008, Jay tee Exports, Kol. Vs. IT Dept by ITAT, Kol, ITA no 35, 36/Kol/2011 and CIT Vs. Continental Engines Ltd 338 ITR 290 (Delhi), therefore, the rejection of the claim of deduction u/s 10B of the Act amounting to Rs.7,26,56,048/- is held to be unjustified and the decision of the AO is reversed and the AO is directed to allow the deduction u/s 10B amounting to Rs.7,26,56,048/- to the appellant.”

1. Ld. CIT(A) erred in law and in facts in deleting the addition of Rs. 7,26,56,048/- made by the assessing officer by holding that no cogent evidence, as a fall out of survey operation, has been brought on record to determine

2. Ld. CIT(A) erred in law and in facts in holding that assessee was having sufficient plant & machinery at its disposal for carrying out manufacturing activity when as per balance sheet on record, there are sewing machines worth Rs. 1.43 lacs and all the manufacturing activity has been executed by the sister concern M/s. N.M. Exports, as discussed in the order.

3. Ld. CIT(A) erred in law and in facts in holding alleged inspections & verifications were made by the Central Excise and Customs Department as regards manufacturing of T-shirts without considering the facts of the case and voluminous evidences on record as discussed in the assessment order.

4. Ld. CIT(A) erred in law and in facts in holding that it is not a case of splitting up of existing business ignoring the detailed facts and evidences mentioned in the assessment order that no undertaking was set up, there was no ownership of goods with the assessee, all the raw materials having being purchased by M/s. N.M. Exports and sister concern was carrying on the business of manufacturing/exporting of T-shirts for more than 20 years,

5. Ld. CIT(A) erred in law and in facts in holding that principles of consistency applies in this case whereas facts of the case are distinguishable and specific action u/s 133A of the Income Tax Act was taken which established the dubious ways of claiming deduction.

6. That the appellant craves the leave to add, alter, modify, include or delete any ground of appeal.

12 M/s Anmol Textiles A.Yr.2011-12 from 31st May 2002 , which was later shifted to Sankrail Indsutrial Park, Dhulagarh, Howrah. The said unit was declared to be a warehousing station u/s 9 of the Customs Act and placed under the administrative control of the Howrah Division of the Central Excise Department of Haldia Commissionerate. It got license for private bonded warehouse to carry out its manufacturing activities from the said premises and export the finished goods without payment of excise duty. These facts indicate that the assessee is engaged in manufacturing activity. The ld AR submitted that the first year of claim of deduction u/s 10B of the Act was Asst Year 2003-04 which was granted by the ld AO upto Asst Year 2010-11. Out of these, the assessments for the Asst Years 2004- 05, 2007-08 , 2008-09, 2009-10 and 2010-11 were completed u/s 143(3) of the Act vide orders dated 26.12.2006 , 24.11.2009 , 24.12.2010 , 9.11.2011 and 26.3.2013 respectively. Based on the assessment framed for the Asst Year 2011-12 (i.e the year under appeal), the ld AO reopened the assessments for the Asst Years 2007-08 , 2008- 09 , 2009-10 and 2010-11 by issuing notice u/s 148 of the Act. The ld AR stated that the reasons recorded by the ld AO for those years were the same as was recorded in the assessment order for the Asst Year 2011-12. We find from the paper book enclosed before us that :- a) The re-assessments for the Asst Years 2007-08 and 2008-09 were completed by the ld AO wherein the fact of carrying on of manufacturing activity was accepted by the ld AO and benefit of deduction u/s 10B of the Act was duly granted to the assessee vide orders u/s 143(3) / 147 of the Act dated 10.9.2015 and 28.8.2015 respectively. b) The re-assessment for the Asst Year 2009-10 was completed by the ld AO u/s 144/147 of the Act on 31.7.2014 denying the benefit of deduction u/s 10B of the Act. The ld CITA vide his order in Appeal No. 10/CIT(A)-13/Kol/Cir-44/2014-15 dated 24.6.2016 granted relief to the assessee by accepting the contentions of the assessee and granted deduction u/s 10B of the Act. Against this order of ld CITA, the ld AR stated 12

13 M/s Anmol Textiles A.Yr.2011-12 that no appeal has been preferred by the revenue before this tribunal. Accordingly it was argued that the revenue had accepted the contentions of the assessee that it is engaged in manufacturing activities and thereby eligible for deduction u/s 10B of the Act. c) The re-assessment for the Asst Year 2010-11 was completed by the ld AO wherein the fact of carrying on of manufacturing activity was accepted by the ld AO and benefit of deduction u/s 10B of the Act was duly granted to the assessee vide orders u/s 147 /143(3) of the Act dated 28.8.2015.

6.1. From the aforesaid facts, it could be seen that the assessee was given deduction u/s 10B of the Act by the revenue commencing from Asst Years 2003-04 to 2010-11. In fact based on the assessment framed for the Asst Year 2011-12, the assessments for the earlier years were reopened wherever possible, based on the same reasoning given in Asst Year 2011-12, and in the re-assessments completed, the ld AO had granted deduction u/s 10B of the Act to the assessee. Hence we hold that the very basis on which the ld AO had held that assessee is not a manufacturer and consequentially not eligible for deduction u/s 10B of the Act stands nullified by his own re-assessment orders passed for the Asst Years 2007-08 , 2008-09 and 2010-11. For the Asst Year 2009-10, though the ld AO again took a different stand and denied the benefit of deduction u/s 10B of the Act to the assessee, the same was duly granted to the assessee by the ld CITA vide his order dated 24.6.2016. The ld AR stated that this order of ld CITA has been accepted by the revenue by not preferring further appeal to this tribunal. Hence the very basis or foundation on which the ld AO denied the benefit of deduction u/s 10B of the Act stood nullified by his own orders or the order of his higher authority. These facts were not controverted by the revenue before us. The facts for the year under appeal are not different from the earlier years wherein relief was granted to the 13

14 M/s Anmol Textiles A.Yr.2011-12 assessee. Hence we hold that the assessee should be given deduction u/s 10B of the Act. We place reliance on the decision of the Hon’ble Supreme Court in the case of Shasun Chemicals & Drugs Ltd vs CIT reported in (2016) 388 ITR 1 (SC) wherein it was held that :- 13. In the Income Tax Return which was filed for the Assessment Year 1995- 96 the assessee had claimed that it had incurred a sum of Rs.45,51,890/- towards the share issue expenses and had claimed 1/10th of the aforesaid share issue expenses under Section 35D of the Act from the Assessment Years 1995-96 to 2004-05. This claim of the assessee was found to be justified and allowable under the aforesaid provisions and on that basis 1/10th share issue expenses was allowed under Section 35D of the Act. When it was again claimed for the Assessment Year 1996-97, though it was disallowed and on directions of the Appellate Authority, the Assessing Officer made physical verification of the factory premises. He was satisfied that there was expansion of the facilities to the industrial undertaking of the assesseee. It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed. Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the block period was 10 years starting from the Assessment Year 1995-96 to Assessment Year 2004-05. The High Court, however, disallowed the same following the judgment of this Court in the case of Brook Bond India Ltd (supra). In the said case it was held that the expenditure incurred on public issue for the purpose of expansion of the company is a capital expenditure. However, in spite of the argument raised to the effect that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the provisions of Section 35D of the Act. In any case, it warrants repetition that in the instant case under the very same provisions benefit is allowed for the first two Assessment Years and, therefore, it could not have been denied in the subsequent block period. We, thus, answer question No. 1 in favour of the assessee holding that the assessee was entitled to the benefit of Section 35D for the Assessments Years in question.

15 M/s Anmol Textiles A.Yr.2011-12 6.2. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the judicial precedent relied upon hereinabove, we hold that the assessee is indeed entitled for deduction u/s 10B of the Act for the Asst Year 2011-12 also and the same has been rightly granted by the ld CITA and accordingly we do not deem it fit to interfere with the order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed.

Order pronounced in the Court on 17.04.2018