Income Tax Appellate Tribunal - Indore
Dcit-4(1), Indore, Indore vs Maral Overseas Ltd, Khargone on 20 March, 2026
आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER
AND
SHRI PARESH M JOSHI, JUDICIAL MEMBER
ITA No.570/Ind/2025
(AY: 2004-05)
DCIT-4(1), Indore बनाम/ Maral Overseas Ltd.,
Vs. Maral Sarovar, V& PO
khalbujurg,
Kasrawad, Khargone,
Bhopal
(PAN: AACCM0230B)
(Appellant) (Respondent)
Assessee by Shri Satyajeet Goel, CA
Revenue by Shri Ashish Porwal, Sr.DR
Date of Hearing 03.02.2026
Date of Pronouncement 20.03.2026
आदेश / O R D E R
Per Paresh M Joshi, J.M.:
This is an Appeal filed by the Revenue under section 253 of the income tax Act 1961,[ herein after referred to as the Act for the sake of brevity] before this tribunal. The Revenue is aggrieved by the order bearing Number:-1041/2021-22 dated 20.07.2022[DR No:- 35/11/11 D No:- 408] passed by the Ld. CIT(A) u/s 250 of the Act, which is herein after referred to as the "Impugned order". The Relevant Assessment year is Page 1 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-052004-05 and the corresponding previous year period is from 01.04.2003 to 31.03.2004.
2. Factual Matrix 2.1 That as and by way of an assessment order made u/s 143(3) of the Act the assesse's total income was computed and assessed at Rs.- 28,01,85,652/- i.e. the loss assessed to be carried forwarded. The income of the assessee as per the return of income before the exemption u/s 10B was at Rs- 28,19,75,153/-. The Ld. AO disallowed deduction u/s 35D of Rs. - 6, 89,501/-. The Ld. AO disallowed out of staff welfare the expenses sum of Rs.-10,00,000/-. In addition the Ld. AO also disallowed out of business promotion expenses an amount of Rs.- 1,00,000/-. That the aforesaid assessment is dated 27.12.2006 and that the same is hereinafter referred to as the "impugned assessment order".
2.2 The assessee had filed its return of income on 01.11.2004 declaring total income Nil after claiming deduction u/s 10B along with statutory audit report, tax audit report, certificate in form 56G. certificate in form 10CCAC and in form 29B etc. This return Page 2 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05has been processed u/s 143 (1). The case was selected for scrutiny and statutory notice w/s 143 (2) was issued on 09.03.2005 which was duly served on the assessee on 08.04.2005. Later on further notices were issued u/s 142 (1) (ii).
Detailed questionnaire were issued on 10.04.2006 and 06.11.2006. In response, Shri Ajay Tulsiyan, FCA and Sh. Vishal Bhatia, ACA attended from time to time with whom the case was discussed. Books of account were produced which were examined by test check. Written submissions were made during the course of hearing, which were placed on record after perusal.
2.3 That the assessee company continue to derive income from manufacturing and mainly export of yarn and fabrics as also the garments.
2.4 That the assessee has various units and separate set of books are maintained for the purpose.
2.5 That unit wise final accounts are prepared and then merged in comprehensive final accounts.
Page 3 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-052.6 That for the year under consideration the assessee has not claimed any deduction u/s 80 HHC as in the past, in respect of its export business of its non EOU units.
2.7 That the assessee had claimed the deduction u/s 10B in the respect of its units III and IV situated at Khalbujurg being eligible EOUs, both under the normal computation and also in the computation u/s 115 JB.
2.8 That the said claim was disallowed in the regular assessment proceedings for the assessment year 2002-03 and 2003-04 and therefore the assessee was asked to explain as to why the exemption u/s 10B should not be disallowed for the reasons elaborated in the assessment order for the those years.
2.9 That the assessee made following submissions before the Ld. AO:-
"The company has claimed deduction u/s 10B in respect of the profits of units III and II being eligible EOUs, both under the normal computation and also in the computation u/s 115JB as per the detailed working enclosed with the return also read with note no:- 3 &6 forming the part of the return.Page 4 of 47
Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
The said claim has been disallowed in the regular assessment proceedings for the assessment year 2001-02 to 2003-04. However the said claim was allowed in the first appeal for the AY 2001-02 and 2002-03, whereas the first appeal for AY 2003-04 is still pending. A detailed note on the allowability of this claim is annexed here with at page no.
51 to 54. Detailed note on alloability of claim u/s 10B
1. That the claim of exemption u/s 10B was denied to the company for the first time in its regular assessment for AY 2001-02 which has been subsequently allowed in first appeal in favour of the company by the Hon'ble CIT(A) in appeal no:- IT-92 2004-05 vide order dated 13.08.2004.
2. The above claim of exemption has been allowed by the Hon'ble CIT(A)-II Indore in appeal for AY 2001-02 vide Para 2.4 at page no:-10 his order dated 13.08.2004 holding as under:-
"As per the clear, plain& unambiguous language of the section10B as applicable to this relevant assessment year, the applicant is entitled to claim of exemption for the period of 10 consecutive assessment years beginning with assessment year relevent to the previous year in which the unit began to manufacture or produce. That the facts in the case of Tata Tea Ltd are different and clearly distinguishable from those in the case of this appellant. I, therefore adjudicate ground no 1 and ground no 1(a) in favour of the appellant and direct the AO to allow exemption under section 10B in respect of the normal computation as well 5 as the computation under section 115JB, for all the eligible units of the EOU, for a period of ten years, starting from the assessment year in which the respective unit started production. In result, all the units of the EOU of the appellant are eligible for exemption Page 5 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
under section 10B for the year under appeal which the AQ is directed to allow."
3. "That condition which have been prescribed under Section 10B of IT Act for an undertaking to be eligible for exemption are as under:
a) It manufactures or produces any articles or things or computer software;
b) It is not formed by splitting up or the reconstruction of the business already in existence:
Provided that this condition shall not apply in respect of any undertaking which is formed as result of the reestablishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in Section 33B, in the circumstances and within the period specified in that Section
c) It is not formed by the transfer to new business of machinery or plant previously used for purpose.
d) The undertaking should be approved as hundred percent export oriented undertaking."
4. "From the perusal of above conditions prescribed in the IT Act in Section 10B, it is clear that the undertaking should be a new one and should produce articles or things or computer software as specified. That all these conditions have been fully complied with by the company."
5. "As regards the observation of Your Honour that all these units are interdependent and complementary to each other and that these two units cannot be said to be independent new units entitled for separate claim of exemption w/s 10 B of the IT Act. with all due respect, it is submitted, is not correct, since these units are independent in themselves & are being operated as such. We take this opportunity 10 invite Your Honour to see these units physically in operation so that our above submission is corroborated more satisfactorily. It Will also be relevant to bring here. to the kind knowledge of Your Honour, some of the facts, which have a direct hearing. in deciding whether these two spinning units III & IV are independent and new units or not."
6. "In so far as the new spinning unit no. 11 is concerned Page 6 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05a) That the new spinning unit No. III was set up installing additional 16224 spindles, which took the total installed capacity to 38400 spindles from the existing 22176 spindles.
b) Four new Knitting machines were installed against the existing 13 knitting machines.
c) Facilities to manufacture additional 6 Lakh p.a. pieces of garments were put in place as against the earlier installed capacity of 13.5 Lakh garments per annum.
d) There was a total addition of Rs. 44.76 crores during the year, 1o the existing gross block of 63.27 crores as on 01.04.95.
e) The turnover of the company almost doubled to Rs.
121.72 crores during that year from Rs. 67.26 crores in the immediately preceding year and the profits before depreciation also took a quantum leap of Rs. 3.37 crores (increased to Rs. 15.36 crores from Rs. 11.98 crores) during that year from Rs. 67.26 crores in the immediately preceding year and the profits before depreciation also took a quantum leap of Rs. 3.37 crores (increased to Rs. 15.36 crores from Rs. 11.98 crores).
It will not be out of place, to draw Your Honour's kind attention to some of the similar facts for the assessment year 1999-00 (Relevant accounting year 1998-99). during which the IV spinning unit was set up.
a) Additional 16128 spindles were installed taking the total installed capacity 10 54528 spindled.
b) The company imported and installed twelve circular Knitting machines
c) The company also set up a power plant of 4.25 MV capacity
d) The ready made garments manufacturing facilities were set up to manufacture additional 6 Lacs garments per annum.Page 7 of 47
Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05e) The total addition to the gross block of the company was to the tune of Rs. 69.43 crores, during the year as against 121.01 crores as at the opening of the year.
f) The turnover of the company during the year increased to Rs. 224.5 crores as against Rs. 158.37 crores in the immediately preceding year.
7. In view of the above facts and figures, it is further submitted as under: -
a) That new units have been launched by the assessee by setting up all together new plant and machinery, construction of new building by investing substantial funds.
b) Both the new industrially recognizable units are integrated unit by themselves; where in distinct and marketable products are being manufactured. The new industrial undertakings are separate and independent production units and the yarn produced is commercially tangible product. These units can be 'carried on separately without complete absorption and losing their identity in the old business.
c) That the principal business of the assessee can be carried on even if the said two additional units cease o function and vise versa.
8. That reliance is placed on textile Machinery Corporation limited v/s CIT (1977) 107 ITR 195 (SC). That this judgement through rendered in context with section 15C of the 1922 Act (corresponding section 80J of 1961 Act), but the ratio laid down therein in equally applicable in the context of section 10B. as the question before the H'ble apex court was also the same i.e whether the new undertaking setup by the assessee was entitled to relief u/s 15C of the 1922 Act (corresponding section 80J of 1961 Act).
Page 8 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-059. It is also to be noted that section 10B does not prescribe for fresh approval for every unit from the concerned Government department. The only requirement is that the undertaking should be approved. A plethora of judgments of the Supreme Court and various High courts have firmly laid down the rule that a provision for deduction, exemption or relief should be interpreted liberally, reasonably and in the favour of the assessee. and it should be so construed as to effectuate the object of the legislature and not to defeat it. The correct way of reading the different heads of exemption enumerated in a section would be to treat each as a separate and distinct head of exemption. Since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. Full effect should be given to the language used in the provision and a rigid or restricted interpretation must be avoided. The provision should be assigned such meaning as would enable the assessee 10 secure the benefit intended to be given by the legislature to the assessee.
10. In view of the above it is requested that the company should be allowed exemption in respect of the profits of its new spinning units number 11l and IV under section 10B, as claimed in the return of income.
11. In the alternate, without prejudice to our basic claim of exemption under section 10B. it is requested that in case. Your Honour is of the view that the said exemption is not allowable to the company, to allow the benefit of deduction under section 8OHHC of the Act for profits from these units".
2.10. The Ld. AO in the impugned assessment has observed and held as under:-
"I have given due consideration to the submissions made by the assessee and analyzed the facts of the case in the spirit of legal perspective, Section F0B was introduced with effect from 01.04.1989 Page 9 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
which was subsequently amended with effect from 01.04.2001 completely replacing the old section. As per the original part of statute for this exemption, the assessee was entitled to exemption of income derived from export oriented unit for five consecutive assessment years out of eight assessment years. This time frame was later on revised extending the period from five years to ten years but there was no retrospective effect to such an enhancement as per the statute. The assessee has started claiming deduction u/s 10B from AY 95-96 onwards thus five year term expired in AY 99-00 but the assessee continue to claim exemption after the above assessment year also i.e. AY 00-01 onwards. Exemption u/s 10B has been claimed in the subject year at Rs. 3,11.99.744/-. The basis of such a claim is reflected in reply which has been reproduced above. It is necessary to have a look on the provisions contained in section 10 B in this regard. The statute provides for exemption for a period of ten assessment years for which the assessee has adopted its own calculation and interpreted the provisions of this section in the manner suitable to it. The claim is that the assessee has setup two units namely spinning unit III and IV which are located in the business premises of the units which were operational already from 1992. It has been claimed that the new units started their production in 1996-97 and 1999-2000 respectivelv. Thus as per the assessee's calculation, exemption u/s 10B is available in _respect of these units upto A.Y.2005-06 and A.Y.2008-09 respectively.
The assessee's claim is misconceived. On going through the records of the assessee's case, it is observed that unit no. III was in fact setup for the purpose of expansion of the capacity of production of already existing units. The circumstances under which the said expansion was carried out, has been elaborated by the Assessing Officer in the assessee's case for the AY. 2002-03.
The assessee has further argued that separate books of accounts are maintained for this new unit. This aspect is immaterial thus does not make any difference. Nothing has been produced during the course of hearing establishing that a new and separate industrial undertaking has come-up. What is perceived from the submissions made by the assessee, is that the assessee has twisted the issue by naming the units as separate industrial undertaking which happens to be a part of the existing unit. There ought to be independence of an undertaking to Page 10 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
treat it as independent separate industrial undertaking qualifying for exemption u/s 10B.
As regard unit no. iv, which has started production during the period relevant to A.Y. 1999- 2000, the case is not too different. It has been observed by the Assessing Officer during the assessment for the A.Y. 2002-03 that this unit was also started as a measure of enhancing the capacity of the existing units. The situation is no different so far as the subject assessment years is concerned. To sum up the issue, it can be said that the assessee's claim is based on:
a) New Industrial Undertaking have come up for which exemptions upto A.Y.2005-06 and 2008-09 are claimed.
b) Spirit of the law is to grant exemption for export oriented units liberally.
c) Period of eligibility for the exemption should be counted for each units separately i.e. the initial assessment and last assessment year.
d) The exemption was available for a period of 5 years originally which was extended for ten years in the amended section but it has nowhere been provided that the period would not extend to existing units.
The above submissions are found to be incorrect factually and in respect of interpretation of law.
i.The exemption was available to the assessee for the period upto Assessment year 1999-2000 as per the provisions in force when the unit started production. The assessee first claimed the said exemption in AY.1995-96 thus it was entitled to avail the same upto A.Y. 1999- 2000. The amended provision can not be applied to the units which have become operational prior to the amendment or to say which started taking benefits available in the section 10B. ii.There is expansion in the existing business by enhancement in the capacity of production which is evident from the certificate issued by the appropriate authority certifying the aspect of expansion iii.Interpretation of a part of statute cannot have any liberal aspect when the provision are clear and without any ambiguity. Neither the assessee nor the assessing officer can deviate from the basic spirit of law in interpreting the same. There cannot be any adjective like liberal or strict interpretation. The law has to be interpreted in the compartment of letter and spirit.
Page 11 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05iv.So far as the factual position as regard to the establishment of units is concerned. the assessing officer has elaborated the same in the assessment for the AY 02-03 to AY 03-04 and I have also given a brief description. There is nothing establishing that the new units have come up. Mere expansion of existing units does not extend the period of exemption.
v.As regard assessee's contention that the issue has been decided by two different commissioner of income tax (Appeals) in favour of the assessee It is too early to say anything in respect of the orders of the Ld. CIT (A) as these have not been accepted by the department and second appeal has already been filed.
In view of the foregoing Paras, the assessee's claim w/s 10 B fails as such the same is denied.
Without prejudice the above the assessee's accounts reflect income from interest from fixed deposit. interest from suppliers and customers as also interest on refund from income tax as also income by way of export incentives. It has been claimed that the interest has been earned during the course of normal business activity thus the same forms part of profit eligible for exemption u/s 10 B. Another argument in this regard is that the net debit and credit of interest works out to debit part of this head more. As such it has been claim that the interest received should not be ignored for the purpose of exemption u/s 10 B. The above view of the assessee does not hold good. It has been decided by the H'ble Supreme Court in the case of Pandian Chemical Ltd. V/s CIT (262 ITR 278) that the interest derived from the deposits made with the electricity board will not qualify for deduction u/s 80HH as the same is not income from industrial undertaking. In the spirit of the above finding of the H'ble Apex Court, underline principal clearly suggest that the interest income in the case of the assessee does not qualify for exemption u/s 10B. So far as the netting of income under this head is confirm, the assessee's plea is misdirected. The manufacturing and export of goods, thus the same is deductible expenditure where as the income under this head has nothing to do with the export activity. As such this argument of the assessee does not hold good. So far as export incentives are concern they have been held to be not the income derived from industrial under taking by Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Sterling Page 12 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05Foods (237 ITR 579). Accordingly. the same will not qualify for the purpose of exemption u/s 10B."
2.11 The Ld. AO in the "impugned assessment order" has disallowed claim of deduction u/s 35 D of Rs. 6,89,501/-
basis his observations and findings which is reproduced by us as below:-
"2. DISALLOWANCE OF DEDUCTION UNDER SECTION 35D As in the past of the assessee company has claimed the additional deduction u/s 35D of the Income Tax Act 1961 being 1/10 the total share issue expenses of Rs. 69.95.013/- incurred in the Assessment Year 1994-1995 claiming that it is eligible for deduction up to AY 2005- 2006. This claim was disallowed in the past by the AO. The view taken by the Assessing Officer has been confirmed by the CIT (A) in the past too. In response to a query on this point it has been submitted that:
The company has written off a total amount of Rs. 7,79,504/- debited to its profit and loss account as preliminary and share issue expenses and added back the same in its computation. Deduction of Rs. 6,89,501/- was separately claimed in the return /s 33D in the line with earlier years.
The company claimed a deduction of Rs. 6,89,501 under Section 35D of the Act in the computation of total income for the assessment year under reference by appending Note No. 7 to the Return of Income in this regard which read as under:
"The Company has incurred share issue expenses of Rs. 68,95,013/- during the accounting year 1994-95 (Assessment Year 1995-96) which is within the limits laid down under Section 35D and hence allowable @ 1/10 i.e. Rs. 6,89,501/- for 10 assessment years unto assessment year 2005-06. Also refer annexure D to the TAR"
That such claim of the company has been disallowed in the past and the company is contesting the issue before the H'ble ITAT, as the said disallowance has been confirmed in the first appeal. We wish to submit to the office of your Honour that during the financial year 1994-95, relevant to the assessment year 1995-96, the company set up a new unit and installed 16,224 new spindles in addition to the existing 22,176 spindles. For meeting the cost of expansion of business, the company raised funds from the following sources and incurred an expenditure of Rs. 68,95,013/- for the said purpose.
Page 13 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05 SL/NO Particulars Amounts (in
Rs.)
1. Loan from EXIM Bank 10,20,00,000
in INR
2. Loan from EXIM Bank 1,31,00,000
in USD
3. Loan from ICICI in 14,90,00,000
Japanese Yen
4. Issuance of equity 24,50,00,000
shares
Total : 50,91,00,000
It is respectfully submitted that Section 35D of the Act provides for deduction of preliminary expenses under Section 35D of the Act in ten equal installments. Subsection (1) of Section 35D reads as follows:
"35D (i) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31thday of March, 1970, any expenditure specified in sub - section (2),
i).before the commencement of his business, or
ii).after the commencement of his business, in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit.
the assessee shall, in accordance with and subject to the provisions of the section, be allowed a deduction of an amount equal to one-tenth 3 of such expenditure for each of the ten successive previous years R ¢ beginning with the previous year in which the business commences i 3 or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation:".
As per Section 35D(3) read with clause (ii) of Explanation (b) to Section 35D(3) of the Act. the deduction under Section 35D in respect of fresh issue of shares is restricted to 2.5% of the amount of share capital and long term borrowings issued/obtained in connection with the extension of the industrial undertaking which amounts to Rs.50,91,00,000/-, viz Rs.1,27,27,500/- which is more than actual expenditure of Rs.68.95,013 incurred on raising the above funds. Therefore, the additional deduction available to the company under Section 35D of the Act shall be Rs. 6,89,501 (i.e., 10% of Rs.68,95.013/- being actual expenses incurred on raising the above funds) for the assessment year under reference.
Page 14 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05In view of the aforesaid it is respectfully prayed that the said deduction w/s 35D may Kindly be allowed, as has been claimed in the Return of Income filed by the company.
Similar submission was made before Assessing Officers who assessed the assessee's case in the assessment year 1992-93 and 1995-96. Elaborate discussions have been made by the Assessing Officers in those years. The expenses are not allowable u/s 35 D in accordance with the reasons discussed in the said orders. As such the deduction claimed of Rs. 6,89.501/- is disallowed."
2.12 The Ld. AO in the impugned assessment order disallowed assesee's contribution of 10 lakhs under the category disallowance out of staff welfare expenses by observing and holding as under:-
"3. DISALLOWANCE OUT OF STAFF WELFARE EXPENSES:
As in the past the assessee company has made payment of Rs. 10.00 Lacs to Swami Vivekanand Educational Sport, Cultural and Welfare Society' which has been debited under the head of Staff Welfare. In this connection, the assessee has made a written submission as under: -
Contribution of Rs. 10.00 Lakhs to a School set-up in the adjoining area near its EOU -- During the relevant previous year, the company have made a contribution of Rs. 10.00 Lac to Vivekanand Educational, Sports, Cultural and Welfare Society (hereinafter referred to as "the society") and claimed the same as business expenditure under Section 37(1) of the Act. The said expenditure has been disallowed in the past and instead, held the said amount as eligible for deduction u/s 80 G of the Act.
In this regards. it is respectfully submitted, that the appellant's one of the manufacturing unit was set up. as a 100% EOU, at Khalbujurg, district Khargone, about 90 kilometers away from Indore on A B. Road. Later, M/s Century Textiles and Industries Ltd. and M/s Maikal Fibers Ltd. also setup their respective units which were also 100% EOU in that area. Since the area did not have proper education facilities, the three companies decided to create the society to run a school, namely, Page 15 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
Vivekanand Vidya Vihar in order to provide proper education to the children of the employees of three companies because otherwise the three companies were finding it difficult in attracting the best of talents, experienced and suitable qualified peoples to manage their units in an efficient & commercially prudent manner.
The society consisted of representative of the three companies. The three companies were required to contribute sums for the running of the society. Since, the representative of the three companies constituted the aforesaid society, they had a say in the admission of children in the school and the children of the employees of the three companies were given preference in the admission to the school. It will be appreciated that the Chairman and Managing Director of the appellant were on the Board of Governors of the above society.
During the relevant previous year made a payment of Rs. 10 lacs which is, in our respectful submission, allowable deduction under Section 37(1) of the Act, being a necessary staff welfare measure to retain peoples of requisite experience & qualification to manage their unit in an efficient and commercially prudent manner, as such have been incurred wholly and exclusively for the business purpose.
It is a settled proposition that if an assessee contributes towards creation of or supporting a public facility for the benefit of the assessee's employees, then the contribution will partake the character of expenditure wholly and exclusively for the propose of business. This view is supported by decision of Bombay High Court in CIT v. Belpahar Refractories Ltd. (109 ITR 667): Palani Andavar Mills Ltd. v. CIT (110 ITR 742) : CIT v. Rupsa Rice Mills (104 ITR 249) and other cases.
The Bombay High Court in CIT v. Belpahar Refractories Ltd. (supra) held that contribution to a hospital for erecting air conditioned cabins to enable employees to take advantage of hospitalization is allowable as business expenditure. The Madras High Court in Palani Andavar Mill Ltd. v CIT (supra) held that amount spent in the contribution of a school building which was subsequently handed over to the Municipality for the benefit of the children of its employees was deductible as expenditure incurred for welfare of employees. In CIT v. Rupsa Rice Mills (supra), the Orissa High Court held that contribution towards cost Page 16 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
of erection of Primary Health Center near factory premises was admissible a. revenue expenditure.
The view that expenditure actually incurred on the welfare of employees is allowable as deduction under Section 37(1) is supported by the decision of the Supreme Court in Sahazada Nand & Sons v/s CIT (108 ITR 358) in which the Supreme Court observed as under:
Commercial expediency does not mean that an employer should not make any payment to an employee unless the employee is entitled to it under a contract. It is obvious that no business can prosper unless the employees engaged in it are satisfied and contended and they feel a sense of involvement and identification and this can be best secured by giving them a stake in the business and allowing them a share in the profits. It would indeed be a wise step on the part of the employer to offer incentives to his employees by sharing a part of his profits with them. This would be in consonance with Gandhian concept as also modern socialistic approach through which, with its deeply rooted faith in social and economic democracy, regards the employees as much as the employer as co-sharers in the business. If an employer earns profits to which the employees have necessarily contributed by putting in their labour, there is no reason why the employer should not share a part of these profits with the employees. This is the demand of social justice today and it is high time that the administration of our tax law recognised it and encouraged sharing of profits by employers with employees by adopting a progressive and liberal approach in the applicability of Section 36, sub-section (1), clause (ii). What is the requirement of commercial expediency must be judged not in the light of the 19" century laissez faire doctrine which regarded man as an economic being concerned only 10 protect and advance his self interest, however in the context of current socioeconomic thinking which places the general interest of the community above the personal interest of the individual and believes that business or undertaking is the product of the combined efforts of the employees and where there is sufficiently large profits, after providing for the salary or remuneration of the employer and the employees and their prior charges such as interest on capital, depreciation, reserves etc. a part of it should in all fairness go to the employees."
Although the aforesaid observations have been made with reference to provisions of Section 36(1)(ii) but they are equally applicable to provisions of Section 37(1) of the Act under which any expenditure not Page 17 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly or exclusively for purposes of business is allowed as deduction.
In the case of CIT v. Travancore Cochin Chemicals Ltd. 243 ITR 284, the Kerala High Court held that the payment made to the school where children of employees of the assessee get education will not be covered under section 40A(9) of the Act but will be allowed as a deduction under Section 37(1). The facts of the case in brief are as follow: The assessee. a public sector undertaking engaged in the manufacture and sale of certain chemicals, claimed deduction of an amount of Rs. 5,34,406, being the payment made to a school where children of its employees were studying, for reimbursement of the school's proportionate expenditure, on the ground that the same was allowable under Section 40A(10) and Section 37(1) of the Act; being expenditure for welfare of employees and incurred for business purposes. However, the assessing officer disallowed the claim holding that the payment had no direct relation with the business activity of the assessee and was more or less in the nature of a donation. The Commissioner (Appeals) confirmed the disallowance. On second appeal, the Tribunal accepted the assessee's claim on the ground that the said contribution was for business purpose.
In reference. the Kerala High Court held as under: "In the case at hand. the expenditure met by the assessee was wholly and exclusively for the welfare of its employees and also for carrying on the business of the assessee - company more efficiently by having a contended labour force. It was neither a donation covered under Section 40A(9) nor capital in nature nor covered by Section 37(1). Hence, the Tribunal is fully justified in allowing the above expenditure towards contribution for the running of the FACT school, as an expenditure for the smooth functioning of the business of the assessee and also an expenditure wholly and exclusively for the welfare of the employees of the assessee and thus, allowable under Section 37(1) as well as Section 40A10)"
In the case of Mysore Kirloskar Ltd v. CIT: 166 ITR 836, the Karnataka High Court held similarly. In this case, the assessee, a public limited company, engaged in the manufacture and sale of tools. lathes etc. had set-up its business in a backward area. To attract technocrats and men Page 18 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05of managerial skills to its industry and also to make them settle in the area. 1t established a school for the education of the children of the employees and with that object in view. constituted an education trust and started the school.
The assessee company had been donating every year certain sums to meet the expenditure of the school. In the relevant assessment year , the assessee donated Rs. 62,000 and claimed out of it 61 percent by way of deduction under under section 37 (1) of the Act, on the ground that 61 percent of school children were the children of the employees and the ex-employees of the assessee. The Income Tax Officer disallowed the claim for exemption. He, however, allowed 50 per cent of the donation as deduction under Section 80G of the Act. The Appellate Assistant Commissioner upheld the order of the Income Tax Officer. The Tribunal held that the claim of the assessee for deduction could not be allowed for two reasons. namely, (i) that Section 37(1) was not applicable to the case of the assessee since Section 80G was applicable to the donations made by the assessee to the education trust, and (1) that since the school run by the trust, was also open to the children of the persons who were not the employees of the assessee - company, the expenditure incurred by the assessee could not be said to have been incurred wholly and exclusively for the purpose of assessee's business"
On a reference. the High Court observed as under:
"To be an allowance within Section 37(1), barring the exceptions mentioned therein, "the money paid out or away must be paid out wholly and exclusively for the purpose of the business™. The assessee can claim whole of it for deduction in computing the income chargeable under the head "Profits and gains of business or profession.
The basic requirements for invoking Sections 37(1) and 80G are, therefore, quite different, but none the less, the two sections are not mutually exclusive. If the contribution by an assessee is in the form of donations of the category specified under Section 80G, but if it could also be termed as an expenditure of the category falling under Section 37(1), then the right of the assessee to claim the whole of it as allowance under section 37(1) cannot be denied But such money must be "laid out or expended wholly and exclusively for the purpose of business™. The word "wholly" refers to the quantum of expenditure Page 19 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
and the word "exclusively™ refers to the motive, object or purpose of the expenditure"
It is further respectfully submitted that for the purposes of Section 37(1) of the Act, the expenditure claimed therein need not be "necessarily" spent by the assessee. It might be incurred "voluntarily™ and without any "necessity", but it must be for promoting the business. In other words, if expenditure has been incurred by the assessee voluntarily, even without necessity, but if it is for promoting the business, the deduction ought to be a permissible deduction under Section 37(1) of the Act.
The expenditure of Rs. 10 lacs in previous year, was incurred by way of contribution to the society for the welfare of its employees in order to retain the best of talent. It is immaterial that the school was not run by the appellant alone or that the admissions to the school were not restricted to the children of the appellant's employees.
Your Honour's kind attention is invited to the decision in the appellant's own case starting from the assessment year 1997-98 in Appeal No IT- 220/2000-01/322 upto the assessment year 2001-02 in Appeal No IT- 92/2004-2005/ 300 dated 13.08.2004 wherein under similar circumstances. the disallowance made by the assessing officer has been held to be in order with a finding that the A.O. has rightly allowed deduction u/s 80G of the L. T. Act for which it is eligible however we are of the view that this matter still need further review & our claim be examined in view of the above submissions.
In view of the aforesaid, it is respectfully prayed that the contribution of Rs. 10 lacs made in the previous year by the appellant to the society may kindly be allowed as revenue deduction under Section 37(1) of the Act."
The assessee's explanation is not accepted. The amount in question has been paid to a school run by the above society. Neither the said school is owned by the assessee nor the assessee has exclusive control over the same which could provide privilege to the assessee to enforce any action which could be counted as staff welfare. The circumstances narrated in the reply do not change the character of payment so as to bring it within the ambit of section 36 and 37. The school is run by a Page 20 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05society in which net only the children of employees of the assessee company but also other students are imparted education. It is immaterial that the society is managed by the representatives of the assessee company in conjunction with the representatives of other companies whose business premises are located in the vicinity of the school. It hardly matters that the representatives of the company have a prerogative in the admission of the students in the said school. A company as such has no command over the society and it no way provides exclusive right to the company to mend the society in a manner which would benefit the employees of the company o as to bring the expenditure in the category of staff welfare. What is required for an expenditure to be deductible that the same should be wholly and exclusively for the purpose of business. it should be reasonable and should be authenticated by a valid document. So far as the decision of Hon'ble Supreme Court in the case of Sahazad Nand & Sons Vs. CIT 108 ITR 358 as quoted by the assessee is concerned, the same does not satisfy the conditions laid down in section 37. The matter in the quoted cases relate to the issue whether there should be cash payment to the employee or not. The Hon'ble Apex Court has not decided whether any expenditure which has no direct link with the business of the assessee could be treated as allowable. Accordingly, the-said expenditure of Rs. 10 lacs is disallowed and added back to the total income of the assessee as it is in the nature of donation. The assessee will however be entitled to deduction u/s 80G of the L.T. Act for which an alternative claim has been made by the assessee. This view has been confirmed by the Ld. CIT(A) also in the earlier years.
2.13 The Ld. AO in the impugned assessment order made disallowance of Rs 1,00,000/- from the business promotion expenses by observing and holding as under:-
"4. DISALLOWANCE OUT OF BUSINESS PROMOTION EXPENSES The assessee claim of entire business promotion expenses has not been accepted in the past. The issue has been discussed in detail in the earlier years. In this category many of the Vouchers remains self made by the employees, authentically of which can not be accepted in totality. When confronted on this issue the Page 21 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
counsel of the company explained that the company is a professionally managed company and have a well defined set of rules and regulations for its employees. That the expenses are properly supported by vouchers and the accounts are duly audited by two audit firms. That no personal expenses are allowed to the employees. Certain expenses are of course certified by the employees but the same are very nominal. 11 is also not practically possible to obtain bills invoices of items like taxi fare, tips, conveyance, telephone calls made from PCO. Further most of the companies pay a fixed amount per day (TA/DA) to their employees as per their grade, to avoid unscrupulous expenditure by the employees during traveling. The same practice is followed by the government department also. In such cases the employee is not required to submit actual bills and the claim is made on the basis of self certified statement.
The assessee's submission does not satisfy the condition of authenticity and verifiable nature of expenditure. The expenditure remains unverifiable unless complete name and address of the payee and exclusively purpose of business and reasonableness of the expenditure is establish. It has been admitted by the assessee that there are some expenses which are not supported by bills but have been certified by the employees. The assessee has claimed the same as very nominal. Impossibility has been expressed as regard to obtain bills or vouchers of items like taxi fare, tips, conveyance, telephone phone calls for PCO etc. It is therefore reasonable that a lump-sum disallowance of Rs. 1,00,000/- is made from out of business promotion expenses. As such, a disallowance of Rs. 1,00,000/-is made under this head."
2.14 That the assessee being aggrieved by the aforesaid "impugned assessment order" prefers the first appeal u/s 246A of the act before the Ld. CIT (A) who by the "impugned order" has allowed the first appeal of the assessee on the grounds and reasons stated therein. The core grounds and reasons for the allowance [allowed] of the first appeal were as under:-
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"6. I have carefully considered the assessment order and submissions of the appellant. Ground no. 1 of the appeal is related to disallowance of claim of exemption u/s 10B of the Act. The appellant company has claimed exemption u/s 10B in respect of profit earned from its Unit No. III and IV. However, the assessing officer disallowed the claim of exemption on the ground that Unit No. III and IV are merely extensions of existing units and as such the benefit of exemption u/s 10B is not available to the appellant. The second ground for disallowing the claim of exemption u/s 10B in respect of Unit-III was that under the pre- amended law exemption was available for only five years and since the assessee started claiming deduction u/s 10B from A.Y. 1995-96 onwards, the five year term expired in A.Y. 1999-2000 and hence the assessee was not eligible for claiming deduction u/s 10B for the year under consideration despite the amendment in law w.e.f. A.Y. 1999-00 extending the period for exemption u/s 10B from five years to ten years. In this regard, the AO stated that the assessee would be eligible for exemption u/s 10B only as per the provisions in force when the unit started production and the benefit of amended provision cannot be allowed to the units which have become operational prior to the amendment.
6.1. I have carefully considered the assessment order and submissions of the appellant. The findings of the assessing officer are in parity with the findings recorded in AY 2001-02 and 2002-03. In this connection, the matter relating to eligibility to claim exemption u/s 108 in respect of Unit No. III and IV in AY 2001-02 and 2002-03 reached ITAT and a special bench was constituted to adjudicate the said issue. The Hon'ble ITAT, Indore, vide order dated 28.03.2012 as reported in 136 ITD 177 (Indore-Trib.) (SB), after extensively examining the facts of the case and legal provisions of section 10B, decided the issue in favour of appellant and upheld the validity of claim of exemption in respect of Unit III and IV as well as the claim ofexemption for the extended time frame of ten years as per the amendment in section 10B w.e.f. Α.Υ. 1999-2000. The relevant finding of ITAT is extracted hereunder for ready reference:
"Applying the relevant provisions of law as applicable during the years, under consideration, it can be held that in the assessment year 1999- 2000 when the period of exemption was extended from five years to ten years, all the three units of the assessee were eligible for deduction under section 108. Each of the units were eligible for exemption under section 10B, both under the pre-amended law when the exemption was available for five years out of eight years as well as under the mmended law when the exemption was extended to ten consecutive assessment years. As the amendment came into force in the assessment year 1999-2000, the amended laws became applicable to the assessee according to which all the three eligible units of the assessee became entitled for deduction for a period of ten consecutive Page 23 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
assessment years from the date of commencement of manufacture/production by the said eligible undertaking. Furthermore, there is no question of claiming the provision of section 10B to be prospective or retrospective since what the assessee is simply claiming is that the exemption should be allowed as per the provisions of section 10B as applicable in the relevant assessment year. Once that is done, no question arises for denying exemption to the assessee during the relevant assessment years under consideration. It is pertinent to mention here that in the assessment year 1999-2000 the assessee was duly allowed deduction as per the then applicable law whereunder the eligible undertaking is allowed such deduction for a period of ten consecutive years. [Para 61] Deduction under section 10B is allowable in respect of profits of 100 per cent export oriented undertaking. The expression undertaking' has not been defined under section 10B. The said expression has been explained by the Courts in the context of similar other provisions of Act viz. section 15C of the Indian Income-tax Act, 1922, sections 801, 80- HH, 80-1, 80-1A and 80-18 of 1961 Act. The Supreme Court in the case of Textile Machinery Corpn. Ltd. v. CIT [1997] 107 ITR 195 held that the true test is whether the unit claiming deduction is a new and identifiable undertaking separate and distinct from the existing business. It was further held that manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability. [Para 62] It is clear from the above that the Supreme Court has pointed out that new industrial undertaking should emerge as physically separate industrial unit which may exist on its own as a viable unit and the commodity so produced or the results achieved should be commercially tangible products and the undertaking should be carried on separately without completed absorption and losing the identity of the existing business unit; the mere fact that the new unit produces same/similar products would not constitute valid reason to decline the claim of deduction to the new unit. [Para 63] In view of the above discussion, one can safely hold that an undertaking means a unit/business which has a separate and independent existence distinct from the other umts/business, having independent infrastructure, separate plant and machinery being set up with substantial capital investment and having an identifiable output and the profits attributable thereto can be determined. [Part 66) Applying the above proposition to the facts of the instant case, it is found that all the aforesaid conditions are satisfied in the two new Page 24 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
spinning units viz. Unit Nos. III and IV, aphaich were set up by the assessee as a separate and independent production units, by making substantial investment in new building, plant and machinery, etc. wherein distinct and marketable produce are manufactured. In respect of unit no. III, it was found that it was set up in a newly constructed building by installing additional 16224 spindles which enhanced the total capacity to 38400 spindles from the existing 22,176 spindles. Four new knitting machines were installed. The facilities to manufacture additional 6 lakhs per annum pieces of garments were put as against earlier installed capacity of 13.6 lakhs garments per annum. The turnover of the company reached to Rs. 121.72 crores from Rs. 67.26 crores in the immediately preceding year and the profits before depreciation took quantum leap of 3.37 crores. In Unit No. IV, additional 16128 spindles were installed which enhanced the installed capacity to 54528 spindles. 12 circular knitting machines were imported and installed. A power plant of 4.25 MV capacity was set up. The facilities to manufacture readymade garments were set up to manufacture 6 lakes additional garments per annum and the new unit resulted to total addition of gross block of fixed assets by Rs. 69.43 crores as against 121.01 crores at the beginning of the year. The hurnover of the company also increased to Rs. 224.5 crores as against 158.37 crores in the preceding year. Thus, on the facts of the case, both the new spinning units of the assessee have their independent and separate existence which is evident from the copy of invoices along with packing list placed in the paper book which shows that identifiable and marketable products were manufactured by these units. The raw material issue slips also show that the raw material is issued and recorded unit-wise. The wage registers also show that separate workers were engaged and wages were paid and recorded separately. The flow chart of spinning process clearly indicates that each unit is separately set up. The loan sanction letters issued by bank also evidenced sanction of separate term loan to show that the funds were borrowed for new units and the assessee has maintained separate books of account for each unit. All these documentary evidences clearly establish that the assessee has undertaken substantial expansion by setting up new units viz. Unit Nos. III and IV which were separate and independent production units eligible for claim of deduction under section 10B for ten years from the year of start of production in each of the units. [Para 67] In this regard the contention of the revenue was that the assessee had just carried out capacity extension which could not be regarded as a separate industrial undertaking for making it eligible for the claim of deduction under section 10B insofar as the assessee was only granted certificate for enhanced capacity and not for the new industrial undertaking The objection of the revenue was also that the permission Page 25 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
for enhancement of capacity wes merely by way of amendment in the original certificate and not in the form of any new permission/Vertifiotte. In this regard it is found that section 108 does not stipulate for issue of separate approval for each unit from the competent authority. The only requirement sunder the said section is that the undertaking should be approved. [Para 68] From record it was found that the new spinning unit set up by the assessee was duly approved as 100 per cent EOU by the concerned Government department. The relevant permission issued by the Ministry of Industries, Department of Industrial Development, Government of India, es received for setting up new unit. The assessee had also filed letter before the competent authority for enhancement of the licence capacity which was also granted. In view of these documentary evidences, it is to be held that fresh permission uxas granted for a new unit where the competent authority extended the benefit avstilable to 100 per cent export oriented unit for substantial extension of the existing undertaking. [Para 69] In view of the above discussion, it is held that the undertaking existing prior to 1.4.1999 claiming exemption under section 108 would be entitled to exemption for the extended period of ten years and deduction under the said section would be admissible in respect of Unit No. III and Unit No. IV as well for ten years from the year of start of production in these new units since these units were separate and independent production units. [Para 76] 6.2. In respect of the availability of exemption u/s 10B to the units upto Unit-III, Hon'ble Special Bench of ITAT has held that applying the relevant provisions of law as applicable during the years under consideration, it can be held that in the assessment year 1999-2000 when the period of exemption was extended from five years to ten years, all the three units of the assessee were eligible for deduction under section 10B. Each of the units were eligible for exemption under section 10B, both under the pre-amended law when the exemption was available for five years out of eight years as well as under the amended law when the exemption was extended to ten consecutive assessment years. As the amendment came into force in the assessment year 1999- 2000, the amended laws became applicable to the assessee according to which all the three eligible units of the assessee became entitled for deduction for a period of ten consecutive assessment years from the date of commencement of manufacture/production by the said eligible undertaking. Furthermore, there is no question of claiming the the provision of section 108 to be prospective or retrospective since what the assessee is simply claiming is that the exemption should be allowed as per the provisions of section 10B as applicable in the relevant assessment year. It was held that once that is done, no Page 26 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
question arises for denying exemption to the assessee during the relevant assessment years under consideration .
6.3. Since the grounds for denial of exemption u/s 10B in the year under consideration are the same as those for A.Ys. 2001-02 and 2002-03, which have been decided as above by Hon'ble Special Bench of ITAT, respectfully following the same, it is held that the appellant was eligible for claim of exemption u/s 10B in respect of Unit-III as well as Unit-IV for the extended time frame of ten years, which includes the year under consideration.
6.4. Regarding the denial of exemption u/s 10B in respect of units III and IV on the grounds of their being mere extensions of existing units, similar grounds for denial were taken in A.Y. 2001-02 and 2002-03, for which years the issue was referred to the special bench of ITAT and the relevant portion of the judgement of Hon'ble Special Bench of ITAT has already been quoted above, wherein essentially it has been held that the two new spinning units viz. Unit Nos. III and IV, were set up by the assessee as separate and independent production units, by making substantial investment in new building, plant and machinery, etc. wherein distinct and marketable produce are manufactured. In respect of unit no. III, it was found that it was set up in a newly constructed building by installing additional 16224 spindles which enhanced the total capacity to 38400 spindles from the existing 22,176 spindles. Four new knitting machines were installed. The facilities to manufacture additional 6 lakhs per annum pieces of garments were put as against earlier installed capacity of 13.6 lakhs garments per annum. The turnover of the company reached to Rs. 121.72 crores from Rs. 67.26 crores in the immediately preceding year and the profits before depreciation took quantum leap of 3.37 crores. In Unit No. IV, additional 16128 spindles were installed which enhanced the installed capacity to 54528 spindles. 12 circular knitting machines were imported and installed. A power plant of 4.25 MV capacity was set up. The facilities to manufacture readymade garments were set up to manufacture 6 lakhs additional garments per annum and the new unit resulted to total addition of gross block of fixed assets by Rs. 69.43 сгores as against 121.01 crores at the beginning of the year. The turnover of the company also increased to Rs. 224.5 crores as against 158.37 crores in the preceding year. Thus, it was held that on the facts of the case, both the new spinning units of the assessee have their independent and separate existence which is evident from the copy of invoices along with packing list placed in the paper book which shows that identifiable and marketable products were manufactured by these units. The raw material Page 27 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
issue slips also show that the raw material is issued and recorded unit-wise. The wage registers also show that separate workers were engaged and wages were paid and recorded separately. The flow chart of spinning process clearly indicates that each unit is separately set up. The loan sanction letters issued by bank also evidenced sanction of separate term loan to show that the funds were borrowed for new units and the assessee has maintained separate books of account for each unit. It was further held that section 10B does not stipulate for issue of separate approval for each unit from 6 the competent authority. The only requirement under the said section is that the undertaking should be approved and from record it was found that the new spinning unit set up by the assessee was duly approved as 100 per cent EOU by the concerned Government department. The relevant permission issued by the Ministry of Industries, Department of Industrial Development, Government of India, was received for setting up new unit. In view of the above discussion, it was held that deduction under section 10B would be admissible in respect of Unit No. III and Unit No. IV as well for ten years from the year of start of production in these new units since these units were separate and independent production units.
6.5. In the light of decision of Hon'ble Special Bench of ITAT in assessee's own case for AY 2001-02 and 2002-03, and respectfully following the same, it is held that both units III and IV had independent and separate existence with separately identifiable and marketable products, separate books of accounts, wage registers, raw material issue slips as well as separate bank borrowings and both were duly approved as 100% EOU by the concerned Ministry. It is therefore held that the appellant was entitled to the claim of deduction u/s 10B in respect of Unit-III and IV for the year under consideration, both under the normal computation as well as the computation u/s 115JB, in view of h express provisions of clause (ii) of explanation 1 to section 115JB as existing upto A.Y.2007-08. Ground No.1 is accordingly allowed."
8. Ground no. 3 is regarding disallowance of Rs. 10 lakhs being claim of staff welfare expenses. The appellant during the year has paid Rs. 10 lakhs to Vivekananda Educational, Sports and Welfare Society for running school for children of employees of the appellant company and same was claimed as expenses u/s 37(1) of the Act. The assessing officer disallowed the claim on the ground that same is not eligible for deduction u/s 37(1) and held the same eligible for deduction u/s 80G.
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ITA No. 570/Ind/2025 - A.Y.2004-058.1. In this connection, this very issue came for consideration before Hon'ble ITAT, Indore in AYs 1995-96 to 2000-01 in appellant's own case and the Hon'ble ITAT decided the issue in favour of appellant by accepting the claim of deduction u/s 37(1) of the Act. The relevant finding of Hon'ble ITAT in AY 1995-96 (ITA No. 251/Ind/2001 dated 13.11.2009)is extracted hereunder for ready reference:
*4. Ground no. 1 reads as under:
"That the Ld. CIT(A) erred in maintaining the disallowance of Rs. 10,00,000/- being amount paid by the appellant to aschool and claimed as deduction under the head StaffWelfare Expenses. It is submitted that on the facts and in thecircumstances of the case, the said claim of the appellant being legal and proper, the same, requires to be allowed.
8. We have considered the submissions made by both the sides, material on record and the orders of the authorities below.
9. It is noted that the assessee's factory is situated 90 kms. Away from Indore in a village in District Khargone. It is also noted that the society has been formed to run a school with the help of two other corporate entities, having factory at the same location. It is also noted that the fact that children of the assessee's employees are studying in this school is not in doubt. It is further noted that the genuineness of incurrence of this expenditure is also not in dispute. It is also noted that C.M.D. of this Company and other two staff officials are holding prominent position in the governing body of the said school. In this factual background, we find that the impugned sum has not been allowed as an expenditure firstly for the reason that no exclusivity is attached with the assessee either in governing the school or in admission of children of its employees ie. the children of other persons can also study. The other reason is that school is not situated in the factory campus of the assessee. In our view, both these reasons are devoid of any merits for disallowing such expenditure as if the school would have been situated in the factory premises and the children of other persons were not studying therein, how this fact would have entitled the assessee to claim the deduction. Further, if the entry of the other persons would have been restricted, then the expenditure burden on the assessee would have been much more and if that be so, the assessee would have claimed more expenditure as business Page 29 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
expenditure. It is also a settled judicial principle that the term "wholly and exclusively" used in Section 37(1) cannot be interpreted in a manner so as to disallow a genuine business expenditure, if third parties are also benefited thereby so long such expenditure has been incurred in the course of carrying of the business of the assessee. Having stated so, we also find that the decisions relied on by the CIT(A) are totally out of context, hence, not relevant. We are further of the view that if a payment is eligible for deduction u/s 80-G, the same cannot be disallowed u/s 37(1) merely for this reason if such expenditure satisfies the other conditions attached to allowability of a genuine business expenditure, as these provisions operate in different fields. However, an assessee would not be entitled to claim benefit under both these sections simultaneously on the same payment ie, if an assessee has incurred an expenditure of charitable nature and gets deduction of 50% in computing gross total income u/s 80G, then, he cannot claim the balance 50% as business expenditure, as action of the assessee of claiming a deduction u/s 80-G raises a presumption that such expenditure has been incurred as a matter of charity and not as a business expenditure. Equally, the Revenue authorities cannot disallow a genuine business expenditure, as stated earlier, merely for the reason that the assessee could have availed deduction u/s 80-G, which it could not avail, because of absence of positive profits (i.e. gross total income). We are further of the view that when the children of assessee's employees study in this school, the employees are free from the burden of making arrangements for the education of their children, which results into higher efficiency and motivation, having a positive effect on the business activities carrying on by an assessee and, therefore, such act of an assessee has to be considered as undertaken in the course of its business activities and for the purpose of its business. Accordingly, we accept this claim of the assessee and direct the A.O. to allow this expenditure as business expenditure. We are further of the view that judicial decisions cited by the assessee also strongly support the claim of the assessee. Thus, this ground of the assessee stands allowed."
8.2.In the light of decision of Hon'ble ITAT for AY 1995-96 which has been followed and applied in AY 1996-97 to 2000- 01, and the facts being the same for the year under consideration, the claim of staff welfare expenses is hereby allowed. Ground no.3 is accordingly allowed."
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ITA No. 570/Ind/2025 - A.Y.2004-0510. Ground No. 5 is against ad-hoc disallowance of Rs. 1,00,000/- in respect of claim of business promotion expenses. The disallowance relates to expenses incurred by employees on tour and travel, conveyance and telephone charges during official duty etc. The assessing officer has made the said disallowance on ad-hoc basis as done in earlier years on the grounds of inability to fully verify such expenses due to In this regard, it is submitted absence of certain supporting bills and vouchers. by the appellant that assessing officer has not given any basis for making ad-hoc disallowance. The books of account of the appellant are duly audited and comprehensive details in support of expenses were produced before the assessing officer. Moreover, the assessing officer has not pointed any specific defect or infirmity in the claim of expenses and as such the impugned ad-hoc disallowance is not sustainable under the law. In this connection, it was also pointed out by the appellant that this very issue of ad-hoc disallowance of Rs. 1 lakh has been decided by Hon'ble ITAT in AY 1997-98 (ITA No. 415/Ind/2000 dated 15.12.2009) wherein on similar facts, the ad-hoc disallowance was deleted by observing as under:
"54. In ground no.(i), the Revenue is aggrieved by the decision oftite Ld. CIT(A) in deleting the addition of Rs. 1 lakh made by the Assessing Officer out of business promotion expenses.
55. The facts, in brief, are that the A.O. disallowed a sum of Rs. 1lakh out of business promotion expenses of Rs. 10,66,999/- claimed by the assessee to have been incurred on the visits of foreign buyers and of Bank officials. The A.O. disallowed this sum as he was of the opinion that all these expenses could not be considered as incurred wholly and exclusively for the purpose of the business of the assessee. In appeal before the Ld. CIT(A), the assessee submitted that it was a 100% E.O.U. and, therefore, the expenses incurred on the visits of the foreign buyers were in the course of foreign business. As regards to visits of Bank officials, the assessee stated that these expenses were incurred as per terms and conditions of agreement with the Bank, hence, incurred for the purpose of business of the assessee. The Ld. CIT(A) deleted the disallowance made by the Assessing Officer. Aggrieved by this, the Revenue is in appeal before us.
56. The Id. DR narrated the facts and placed reliance on the order of the AO. The Id. counsel for the assessee, on the other hand, placed strong reliance on the order of the Id. CIT(A).Page 31 of 47
Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
57. We have considered the submissions made by both the sides, material on record and the orders of the authorities below.
58. It is noted that the assessee is 100% export oriented units and he also borrowed funds from bank and is enjoying other Ba visit of foreign customers and Bank officials is a business expenditure. Accordingly, we dismiss this ground of the Revenue." Banking facilities. Hence, expenditure incurred on the 10.1. I have carefully considered the issue of adhoc disallowance as well as the submissions of the appellant and the order of ITAT, Indore for A.Y. 1997-98 in the appellant's case on the same issue. The said order has been followed by Hon'ble ITAT in AY 1998-99 to 2000-01 as well. It is noted that since the impugned disallowance has been made by the AO by referring to the same issue in earlier years, which have already been decided by Hon'ble ITAT in the appellant's case, the said disallowance of Rs. 1,00,000/- is hereby deleted, following the above cited decision of the ITAT as well as in the absence of any specific instance of non-verifiability being pointed out by the AO. Accordingly Ground no.5 is allowed.
11. In the result, appeal is Partly Allowed."
2.15 The Revenue being aggrieved by the "impugned order"
has preferred the instant appeal before this tribunal and has raised following grounds of appeal in the form no:-36 against the "impugned order" which are as under:-
"1. Whether on the facts and circumstances of the case, the Ld.CIT(A)-
31, New Delhi has erred in law and on facts in allowing exemption u/s 10B of the Act of Rs, 3,11,99,744/-, account of income of unit IV, which started as a measure of enhancing the capacity of the existing units operational from AY 1992-93 Page 32 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
2.Whether, an undertaking claiming exemption u/s 10B of the Income-
tax Act, 1961, as it existed prior to 01.04.1999 would be 2 entitled for exemption/deduction u/s 10B for extended period of ten years as per the amended provisions of law brought on statute with effect from 01.04.19999
3.Whether on the facts and circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in law and on facts in 3 deleting the disallowance of Rs. 10,00,000/- made by the AO on account of disallowance of staff welfare expenses, having no nexus with the business of the assessee?
4.Whether on the facts and circumstances of the case, the Ld.CIT(A)-31, New Delhi has erred in law and on facts in deleting the disallowance of Rs. 1,00,000/- made by the AO on account of disallowance of business promotion expenses on 4 account of tour & travel, conveyance and telephone charges ete incurred by employees, despite assessee agreeing to the fact that some expenses were not supported by bills and it is a settled law that the onus is on the assessee to bring all material facts on record to establish his claim u/s 37(1)?
5.The order of the Ld.CIT(A)-31, New Delhi is perverse, erroneous and is not tenable on facts and in law.
6 The grounds of appeal are without prejudice to each other.
7.The appellant craves leave to add, amend, alter OR forgo any ground(s) of appeal either on OR before the final hearing of the appeal.
Page 33 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-053 Record of hearing 3.1 The hearing in the matter took place before this Tribunal on 03.02.2026 when the Ld. DR for and on behalf of the Revenue appeared before this Tribunal & interalia contended that the "Impugned order" is bad in law, illegal & not proper. It therefore deserves to be set aside. It was next contended that the registry of this Tribunal has pointed out the delay of 975 days in preferring the present appeal. The "Impugned order" is dated 20.07.2022. The date of service of the impugned order is dated 05.08.2022. The appeal was e-filed 02.07.2025 which period is well beyond the statutory time limit of 60 days. In this regard the Revenue has placed on the record of this Tribunal a letter dated 16.12.2025 by virtue of which the Revenue has prayed that the delay be condoned. In the said letter a detailed explanation is given by the Revenue on the delay in filing the instant appeal. The contents of the said letter are reproduced by us as below:-
Page 34 of 47Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05 Page 35 of 47
Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
3.2 In this regard the Ld. AR of the assessee has submitted Page 36 of 47 Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
that the assessee has no objection on the delay aspect.
Accordingly we condone the delay. Sufficient cause is shown.
There are no malafides. The cause of delay is bonafidely explained basis bonafide reasons. Appeal admitted and taken up for hearing.
3.3 During the course of hearing there after the Ld. AR for the assessee company addressed this tribunal first for which the Ld. DR had no objection.
3.4 The Ld. AR stated that the assessee company is into the manufacturing of yarn, knitting etc. in the Khargone district of M.P. It is into the textile sector. The concerned units amongst others at the location are unit no:- 3 & 4. The relevant section is section 10B of the act. It deals with 100% EOUs. It grants exemptions to the newly established 100% EOUs. The assessee company had set up 100% EOUs also amongst other units at the location.
The Ld. AR for the assessee has placed on the record of this tribunal a chart of issues involved in the instant appeal in summary and easy manner for the understanding of one and all. It is an exercise made in brevity. We reproduce the said Page 37 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05chart which was tendered across bar on date of the hearing.
The said chart of issues reads as under:-
Grou Amount Assessment CIT(A) nd Issue Remarks (In Rs.) order order No. The AO considered the disallowance based on view taken by the assessing officer in AY 2001-02 and 2002-03 wherein the claim exemption u/s 10B was disallowed on the ground that Unit III and IV are mere extension of existing units and cannot be considered as separate industrial undertaking. The issue raised by the AO in AY 2001-02 and 2002-03 was finally decided by Hon'ble Special Bench of ITAT vide order Disallowance of Page 17 dated 28/03/2012 reported in 136 ITD 177 (Indore claim of Page 2 to 7 to 23 Special bench) wherein the claim of exemption in respect of 1 to exemption u/s 3,11,99,7 Unit III and Unit IV was allowed. The order of Hon'ble Special 2 10B in respect of 44/- Finding: Page 6 to Para 6 bench of ITAT has attained finality as the appeal filed by unit III and IV. 7 to 6.5 the revenue stands dismissed by High Court on account of low tax effect.
The CIT(A) allowed the claim of exemption u/s 10B in respect of Unit III and IV by placing reliance on the decision of Special bench.
The issue is fully and squarely covered in favour of the assessee by the decision of Hon'ble Special Bench.
The AO considered the disallowance by holding that the payment does not qualify as allowable expenditure u/s 36 or Disallowance of 37 of the Act.
staff welfare
expense paid to
The CIT(A) deleted the disallowance by following the order of Vivekanand Page 26 Hon'ble ITAT in assessee's own case for AY 1995-96 Educational and to 28 10,00,000 (ITA No. 251/Ind/2001 dated 13/11/2009) wherein 3 Sports welfare Page 9 to 13 /- identical claim of expenses was allowed by Hon'ble Tribunal society for Para 8 by holding it to be genuine business expenses. The decision running a school to 8.2 of Hon'ble ITAT has been subsequently followed by ITAT for children of while deciding appeal for AY 1996-97 to 2000-01. employees of the assessee The issue is squarely covered in favour of the assessee from the decision of Hon'ble ITAT for AY 1995-96 to 2000-01.
Page 38 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05The AO considered the ad-hoc disallowance merely based on earlier years order and on the ground that complete verification of expenses in not possible.
The CIT(A) deleted the disallowance by holding the AO has Ad-hoc Page 30 not given any justifiable basis for ad-hoc disallowance.
disallowance of to 31 Further, the CIT(A) placed reliance on the decision of 4 business 1,00,000 Page 13 to 14 Hon'ble ITAT in assessee's own case for AY 1997-98 promotion Para 10 (ITA No. 415/Ind/2000 dated 15/12/2009) wherein expenses to 10.1 also the ad-hoc disallowance of Rs. 1 lakhs out of business promotion expenses was deleted.
The issue is covered in favour of the assessee from the decision of Hon'ble ITAT for AY 1997-98 to 2000-01.
3.5 The Ld. AR of the assessee company then contended that in so far as disallowance of claim of exemption u/s 10B in respect of unit no. III and IV of Rs.3,11,99,744/- is concerned the Ld. AO considered the disallowance based on the view taken by the assessing officer in AY 2001-02 and 2002-03 wherein the claim u/s 10B was disallowed on the ground that unit III and IV are mere extension of existing units and these units cannot be considered as separate industrial undertaking. It was submitted that Assessee Company is manufacture of textile products which it manufacture's at their plant in Khargone Dist. Of M.P. village Khulbujurg. There are initially installed units of yarn Page 39 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05and knitting and later on independent units like III and IV were established as separate and independent plants as 100% EOUs with the approval of all the concerned authorities of Govt. of India state of M.P. Our attention was invited to Para 6.1, 6.2 of the impugned order (internal page 17-21). The relevant portion of the impugned order already reproduced by us was too read out in the hearing. In the final analysis it was contended that now the issue is squarely covered by in case titled Maral Overseas Ltd. v/s Additional Commissioner of Income Tax reported in (2012) 136 ITD 177 (Indore-Trb)(SB) order dated 28.03.2012 where in the same issue of AY 2001-02 and 2002-03 had reached and Hon'ble ITAT (SB) Indore held in favour of assessee by treating units III and IV as 100% EOUs eligible for benefit u/s 10B of the act. The relevant paragraphs 1, 2, 68, 69 and 76 were read out which we reproduce as below:-
" 1. This Special Bench is constituted by Hon'ble President under section 255(3) of the Income-tax Act, 1961 for deciding the following questions of law : -
1. "Whether, an undertaking claiming exemption u/s 10B of the Income-
tax Act, 1961, as it existed prior to 1.4.1999 would be entitled for exemption/deduction u/s 10B for extended period of ten years as per the amended provisions of law brought on statute with effect from 01.04.1999 ?"
Page 40 of 47Maral Overseas Ltd.ITA No. 570/Ind/2025 - A.Y.2004-05
2. "Whether, in the facts and circumstances of the case, the undertaking is eligible for deduction on export incentive received by it in terms of provisions of Section 10B(1) read with Section 10B(4) of the Act ?"
2. Brief facts of the case are that the assessee is a company engaged in the manufacture and mainly export of cotton yarn, grey and finished knitted cotton fabrics and readymade garments. During the assessment year 2001-02, the assessee has claimed income exempt u/s 10B of I.T. Act for three units namely original unit which started production from A.Y. 1992-93, spinning unit No. III which started production from A.Y. 1996-97 and spinning unit No. IV which started production from A.Y. 1999-2000. This is given below in tabular form:-
Relevant E.O.U. Date of Commercial Production Assessment Year A. Original Unit 01.02.1992 1992-93 B. Spinning Unit No. III 01.06.1995 1996-97 C. Spinning Unit No. IV 19.08.1998 1999-00
3. During course of assessment, the Assessing Officer observed that the first year of operation of original unit was assessment year 1992-93 and as there was loss, as per provisions of Section 10B(3), the assessee company exercised its option not to avail exemption u/s 10B of Income- tax Act, 1961, for assessment years 1992-93, 1993-94 and 1994-95. As such, the first year of its claim u/s 10B was assessment year 1995- 96 and the same was admissible up to assessment year 1999-2000 only since the assessee was entitled for deduction only for five consecutive years out of eight years. As per the Assessing Officer, the assessee went ahead further and claimed exemption u/s 10B for assessment year 2000-01 and assessment year 2001-02 also. As per the Assessing Officer, the assessee company exceeded its claim beyond permissible limit of 5 consecutive years out of eight years. He further held that this claim was overstitched to separate Units III and IV set up in assessment years 1996-97 and 1999-2000 resulting into extended claim up to assessment years 2005-06 and 2008-09 respectively. As per the Assessing Officer, the unit Nos. III and IV are interdependent and complementary to each other, therefore, those could not be held to be independent new units entitled for claim of exemption u/s 10B of Income-tax Act, 1961. Thereafter, relying upon the decision of Hon'ble Kolkata Tribunal reported in Tata Tea Ltd. v. Jt. CIT [2003] 87 ITD 351, the Assessing Officer concluded that the assessee company was entitled for exemption up to assessment year 1999-2000 only and its claim of exemption in subsequent years was not tenable and, therefore, the same was rejected.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxx Page 41 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-0568. In this regard the contention of the learned CIT DR was that the assessee had just carried out capacity extension which could not be regarded as a separate industrial undertaking for making it eligible for the claim of deduction u/s 10B insofar as the assessee was only granted certificate for enhanced capacity and not for the new industrial undertaking. The objection of the learned CIT DR was also that the permission for enhancement of capacity was merely by way of amendment in the original certificate and not in the form of any new permission/certificate. In this regard we find that section 10B does not stipulate for issue of separate approval for each unit from the competent authority. The only requirement under the said section is that the undertaking should be approved. The definition of "100% export undertaking" as provided in clause (iv) of Explanation 2 to section 10B provides as under :-
'(iv) "hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export- oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;'
69. From record we find that the new spinning unit set up by the assessee was duly approved as 100% EOU by the concerned Government department. The relevant permission dated 13.3.1995 bearing No. 144/EOB/61/95 issued by the Ministry of Industries, Department of Industrial Development, Government of India, was received for setting up new unit. Necessary corrections in the permission dated 13.3.1995 were also carried out by the Ministry vide letter dated 31.5.1995. The assessee had also filed letter dated 14.4.1998 before the competent authority for enhancement of the licence capacity which was also granted on 2.6.1998. In view of these documentary evidences, we hold that fresh permission was granted for a new unit where the competent authority extended the benefit available to 100% export oriented unit for substantial extension of the existing undertaking.
Xxxxxxxxxxxxxxx
76. In view of the above discussion, we hold that the undertaking existing prior to 1.4.1999 claiming exemption u/s 10B of the Act would be entitled to exemption for the extended period of ten years and deduction under the said sections would be admissible in respect of unit No. 3 and unit No. 4 as well for ten years from the year of start of production in these new units since these units were separate and independent production units. Thus, the first question referred to the Special Bench is answered in the affirmative."
Page 42 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05It was submitted that Ld. CIT(A) allowed the claim of exemption u/s 10B in respect of unit III and IV by placing reliance on decision of Special Bench (Supra).
It was also submitted that whole issue u/s 10B for unit no. - III and IV are fully and squarely covered in favour of the assessee by the decision of Special Bench (supra). The above arguments were for ground no:- 1 to 2.
3.6 The Ld. AR for the ground no:-3 where by the Ld. CIT (A) in the "impugned order" had deleted disallowance of Rs. 10 lakhs which was originally made by Ld. AO on account disallowance of staff welfare expenses having no nexus with the business of the assessee it was submitted that entire issue is once again covered by in assessee own case by ITAT order for AY 95-96 (ITA No: - 251/Ind/2001 dt. 13/11/2009) which is already reproduced by Ld. CIT(A) in the impugned order at Para 8 & 8.1 the Ld. AR finally submitted that issue is of recurring nature and prayed that same be allowed and CIT(A) impugned order in this regard be upheld.
Page 43 of 47Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-053.7 With regard to ground no. - 4 which deals with deletion of disallowance of Rs. One lakh deleted by CIT (A) in the impugned order as originally the said amount was disallowed by Ld. AO on account of business promotion expenses on account of tour and travel, conveyance and telephone charges etc. it was submitted by the Ld. AR by drawing the attentions of ours to internal Page 13 and 14 of the impugned assessment order where the required addition/ disallowance was made. Next our attention was invited to internal page 30 of CIT (A) impugned order Para 10 wherein the Ld. CIT relying on assesse's own case on similar fact/ issue was too covered by ITAT decision in AY 97-98 [ITA No.-
415/Ind/2000 dated 15.12.2009]. It was therefore prayed that Ld. CIT (A) impugned order be upheld.
3.8 Per contra the Ld. DR appearing for and on behalf of the revenue contended that Income Tax Dept. rely upon the "impugned assessment order" made by Ld. AO. In rejoinder Ld. AR submitted that all grounds of revenue are covered by ITAT orders respectively as stated earlier and recorded by CIT (A) in the impugned order itself. Hence no interference is Page 44 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05required for section 10B and disallowance of Rs. 10 lakh and one lakh respectively as discussed and debated today.
Hearing was then closed by the Bench.
4. Observations Findings & conclusions 4.1 We have to decide the legality, validity and proprietary of the "impugned order" basis records of the case & the rival submission canvassed before us.
4.2 We have carefully perused the records of the case and have heard the submissions.
4.3 We basis records of the case & after hearing & upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that the "impugned assessment order" is rightly and meritoriously set aside by the Ld. CIT (A) by passing the impugned order in respect of grounds raised before us.
The issues are well analysed, examined and fair order basis merits are given by the Ld. CIT (A). We find no infirmities in it either legally or factually or both. The revenue has failed to assail the "impugned order" basis any material, evidence, Page 45 of 47 Maral Overseas Ltd.
ITA No. 570/Ind/2025 - A.Y.2004-05arguments (both legally and factually) before us. Reliance on the "impugned assessment order" or Ld. AO is meaningless as the matter travelled to first appeal. The reasoning and logic of Ld. CIT (A) in the impugned order is required to be questioned and assailed basis reasons given in the order. All the issues are fully and squarely covered by the orders of ITAT Indore Bench (supra) on each issue and respectfully following those orders we upheld the impugned order and dismiss the revenue's appeal.
4.4 In view of above, we upheld the "impugned order" and dismiss the appeal of the revenue.
5 Order 5.1 In the result appeal of Revenue is dismissed.
Pronounced in open court on 20.03.2026.
Sd/- Sd/- (BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore Dated : 20/03/2026 Patel/Sr. PS Page 46 of 47 Maral Overseas Ltd. ITA No. 570/Ind/2025 - A.Y.2004-05 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore Page 47 of 47