9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (3) TMI 258 - AT - Income TaxClaiming a deduction under Section 10AA - Special provisions in respect of newly established Units in Special Economic Zones - The AO examined the process through which the assessee is obtaining the finished products as against initial purchase items inferred that the assessee merely doing purchase and sale of goods and no manufacturing or processing was done as there were no machines or manufacturing set up - the assessee contented that is continuously engaged in the business of trading and manufacturing of precious and semi precious stones and the revenue itself has allowed deduction u/s 10AA in the immediately preceding year and has been granted letter of approval by the Development Commissioner, Surat u/s 15(9) of the SEZ Act to set up a unit for undertaking authorized operations of manufacturing and trading of the Diamond and Jewelery and the benefits u/s 10AA will be available to trading in the nature of re-export of imported goods- The assessee claims benefit under Section 10AA justifying its classification under service (referred to as provide any service under the said section). As the Income Tax Act does not define the term service , the assessee company has to take reference to the definition of service referred to in the SEZ Act, 2005 (given that the Section 10AA was introduced by SEZ Act, 2005 and referred to in the Second Schedule to the said Act) and further the SEZ Act, 2005 has overriding effect on all other enactments by virtue of section 51 of SEZ Act, 2005. Held that - Though vide Instruction no. 1/2006 dated 24-03-2006, it was clarified that trading units can be set up in the SEZ. However, the modification was made on 24-05-2006 in which it was made clear that the deduction u/s 10AA will be available in respect of the trading in the nature of re-export of imported good- Thus one will have to consider the implication of Section 51 of the SEZ Act , which says that it will have overriding effect over all the other laws. It means that anything in-consistent to the provision of the SEZ Act will not be considered. Thus the word services as mentioned in Section 10AA cannot be construed in-consistently with the definition of services given in the SEZ Act. Under the SEZ act, the trading is included in the services provided the trading is export of imported goods. We therefore, feel that the assessee is entitled to deduction u/s 10AA of the Act and therefore, the ld. CIT(A) was justified in allowing the exemption - Appeal in the favour of assessee.
Issues Involved:
1. Eligibility of deduction under Section 10AA of the Income Tax Act, 1961. 2. Definition and applicability of "services" under Section 10AA. 3. Applicability of the SEZ Act, 2005 definitions to the Income Tax Act. 4. Doctrine of promissory estoppel and its application. Issue-Wise Detailed Analysis: 1. Eligibility of Deduction under Section 10AA of the Income Tax Act, 1961: The primary issue was whether the assessee was entitled to a deduction of Rs. 12,26,32,018 under Section 10AA of the Income Tax Act, 1961. The assessee firm engaged in trading and manufacturing of precious and semi-precious stones, diamonds, and gold jewelry claimed this deduction for its Surat unit. The AO denied the deduction, arguing that the assessee was not engaged in manufacturing or processing but merely trading without any value addition. The AO's decision was based on the absence of fixed assets and machinery at the Surat unit and the nature of goods purchased and sold being identical. 2. Definition and Applicability of "Services" under Section 10AA: The AO contended that the definition of "services" under the SEZ Act, 2005 could not be imported into the Income Tax Act. The AO relied on various judicial decisions to argue that definitions in one statute cannot automatically apply to another. The AO also emphasized that provisions conferring benefits should be interpreted strictly. The assessee argued that trading activities, specifically re-export of imported goods, should be considered as services under Section 10AA, as defined in Rule 76 of the SEZ Rules, 2006. 3. Applicability of the SEZ Act, 2005 Definitions to the Income Tax Act: The CIT(A) and Tribunal held that Section 10AA was inserted into the Income Tax Act by the SEZ Act, 2005, and thus the definitions under the SEZ Act should apply. Section 51 of the SEZ Act states that its provisions have an overriding effect over other laws. The Tribunal noted that the SEZ Act's definition of "services" includes trading activities, specifically re-export of imported goods, as per Rule 76. The Tribunal also referenced Section 27 of the SEZ Act, which states that the Income Tax Act applies to SEZ operations subject to modifications specified in the Second Schedule. 4. Doctrine of Promissory Estoppel and Its Application: The Tribunal invoked the doctrine of promissory estoppel, referencing the Supreme Court's decision in Union of India v. Godfrey Philips India Ltd., to argue that the government is bound by its representations. The Ministry of Commerce's Instruction No. 4/2006 clarified that trading activities in the nature of re-export of imported goods are eligible for benefits under Section 10AA. The Tribunal held that the government had promised these benefits, and the assessee was entitled to rely on this promise. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under Section 10AA. The Tribunal concluded that the assessee's trading activities, specifically the re-export of imported goods, qualified as "services" under the SEZ Act, and thus the assessee was entitled to the deduction. The Tribunal emphasized the overriding effect of the SEZ Act and the doctrine of promissory estoppel in its decision.
|
