Judgment Rakesh Kumar Garg, J. 1. The Revenue has filed the present appeal under Section 260A of the IT Act, 1961 against the order dt. 27th April, 2007 passed by the Tribunal, Chandigarh Bench B\ Chandigarh in ITA No. 368/Chd/2002 in the case of respondent-assessee for the asst. yr. 1998-99 raising the following substantial questions of law: (A) Whether the Tribunal has erred in law in granting exemption under Section 10B, when no claim was made by the assessee in the return of income or the revised return, which is in violation of the Honble Supreme Court decision in the case of Goetze (India) Ltd. us. CIT (2006) 204 CTR (SC) 182 ? (B) Whether on the facts and in law, the Honble Tribunal was justified in granting the benefit of deduction under Section 10B on conversion of an existing unit into an EOU from a subsequent date, by ignoring the provisions of Sub-section (2) of Section 10B ? (C) Whether on the facts and in law, the Honble Tribunal was justified in allowing the bad debt of Rs. 1 lac which had not formed part of total income of the assessee in earlier previous year and was of capital expenditure in nature ? 2. The respondent filed return of income for the asst. yr. 1998-99 on 30th Nov., 1998 declaring income of Rs. 22,59,76,930. Later on the respondent filed revised return of income on 21st March, 2000 declaring total income of Rs. 22,01,69,050. During assessment proceedings the assessee contended that income of one of its units, Arihant-II is exempt under Section 10B. The assessment was completed by the Jt. CIT, Special Range, Ludhiana on 30th March, 2001 at an income of Rs. 28,97,90,970 under Section 143(3) and the claim of Rs. 1 lac as bad debt claimed by the assessee was also disallowed. 3. Being aggrieved against the said order of the AO, the respondent preferred appeal before the CIT(A)-I, Ludhiana. In appeal, the CIT(A)-I, Ludhiana vide his order dt. 31st March, 2002 upheld the decision of the AO on the issue of 10B with the observation that the respondent has not fulfilled the conditions of Section 10B(2) while filing its claim before the AO. The CIT(A) confirmed the sum of Rs. 1 lac disallowed as bad debt with the view that the item is definitely capital in nature and cannot be allowed under Section 36(l)(vii)/37(l) of the Act. The CIT(A) confirmed the sum of Rs. 1 lac disallowed as bad debt with the view that the item is definitely capital in nature and cannot be allowed under Section 36(l)(vii)/37(l) of the Act. 4. The assessee filed further appeal before the Tribunal against the order of the CIT(A). The Tribunal vide order dt. 27th April, 2007 passed in ITA No. 368/Chd/2002 decided the issue in favour of the respondent. It has observed that the respondent company came into operation during the asst. yr. 1991-92 whereas the Circular No. 1 of 2005 was issued on 6th Jan., 2005 [(2005) 193 CTR (St) 85]. Since the circular is not with retrospective effect, and the assessee unit got registered as 100 per cent EOU during the financial year relevant to asst. yr. 1995-96, as the permission was granted by Government of India, Ministry of Industry, Department of Industrial Development, Secretariat for Industrial Approval, EOU section. New Delhi vide their letter dt. 28th Oct., 1994 the deduction shall be restricted to the profit derived from exports from and after the date of approval of DTA unit as 100 per cent EOU and not for the earlier period. 5. As regard the issue of bad debt of Rs. 1 lac, the Tribunal in its order allowed the appeal of the respondent with the view that the matter is pending before the Honble jurisdictional High Court in the case of CIT v. Vardhman Polytex Ltd. (IT Appeal No. 241 of 2004) dt. 21st Aug., 2006 with a rider that if the decision in the case of CIT v. Vardhman Polytex Ltd. is reversed by the Honble Larger Bench that will be binding on the respondent. 6. Sh. Sanjiv Bansal, counsel for the appellant has strongly argued that Sections 10B(2) of the IT Act, 1961 clearly envisages that the benefit of Section 10B is not available to a unit formed by splitting up or the reconstruction of the business already in existence. Circular No. 1 of 2005 was issued on 6th Jan., 2005 and as such the Tribunal was not justified in granting the benefit of the circular to the respondent. It has also argued by him that the Tribunal was not justified in allowing the deduction of Rs. 1 lac as bad debt and the amount was capital in nature and had never formed a part of taxable income of the respondent. 7. It has also argued by him that the Tribunal was not justified in allowing the deduction of Rs. 1 lac as bad debt and the amount was capital in nature and had never formed a part of taxable income of the respondent. 7. The contention raised by the Revenue is without any merit. The assessee has claimed exemption under Section 10B for the first time vide letter dt. 19th Jan., 2001. Admittedly, the impugned exemption was not claimed by the assessee in the original as well as revised return. This unit came into operation in the asst. yr. 1991-92 but during the financial year 1994-95 got converted into 100 per cent Export Oriented Unit (EOU) with the permission of the Department of Industrial Development, Ministry of Industry, Government of India, New Delhi vide letter dt. 28th Oct., 1994. Admittedly, Arihant Spinning Mills Unit-II (ASM-II) came into operation as DTA unit for the first time at Malerkotla, Distt. Sangrur (Punjab) during the asst. yr. 1991-92 and was eligible for deduction under Section 80I of the Act and during the financial year relevant for the asst. yr. 1995-96 the said unit was got registered as 100 per cent EOU. The whole controversy is that the assessee claimed deduction under Section 80I during the assessment proceedings and claimed exemption under Section 10B of the Act after its conversion as 100 per cent EOU. In such a situation, it has to be analysed in the light of both the sections, i.e. Sections 10B and 80I, and their requirement. 8. After going through the record of the case, the Tribunal has given a finding of fact that the unit of the assessee was entitled to the benefit under Section 10B of the Act. Admittedly, the Circular No. 1 of 2005 is clarificatory in nature and the same is also binding upon the Department. In view of these findings of fact no substantial question of law arises in the present case and the same is hereby dismissed.