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2015 (12) TMI 1022 - AT - Income TaxBenefit of deduction u/s 10AA - Held that - Trading done by the assessee is a service and therefore deduction under Section 10AA is allowable. We further noted that on similar facts in case of Goenka Diamonds and Jewellery Limited (2012 (3) TMI 258 - ITAT JAIPUR) the Jaipur Bench of the Tribunal has discussed the issue in detail. The provisions of Section 51 of SEZ Act were also considered. The decision of the Hon ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed Under The Special Court (2007 (8) TMI 343 - SUPREME Court) and the decision CIT Vs. Vasisth Chay Vyapar Ltd. (2010 (11) TMI 88 - Delhi High Court) were also taken into consideration and thereafter it was concluded that in view of the Instruction No.1 of 2006 dated 24-3-2006 as modified by Instruction No.4 of 2006 dated 24- 5-2006 issued by the Ministry of Commerce & Industry Government of India and the definition of service given in the SEZ Act 2005 which overrides the word service accruing in Section 10AA by virtue of Section 51 of the SEZ Act. The assessee engaged in trading in nature of re-export of imported goods and for the same the assessee was entitled deduction under Section 10AA of the Act. - Decided in favour of assessee.
Issues:
1. Jurisdiction of CIT under section 263 of the Income Tax Act. 2. Allowance of deduction under section 10AA for manufacturing activity at SEZ unit. 3. Interpretation of the term "service" for deduction under section 10AA. 4. Application of SEZ Act provisions overriding Income Tax Act provisions. 5. Justification of CIT(A) in allowing the appeal of the assessee. Analysis: 1. The primary issue in this case pertains to the jurisdiction of the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act. The appellant raised concerns regarding the CIT's order being bad in law and without jurisdiction. The CIT was alleged to have erred in holding the assessment order as erroneous and prejudicial to revenue's interests without proper enquiry. The CIT directed the Assessing Officer to examine in detail the manufacturing activities at the SEZ unit, leading to a dispute over the CIT's authority under section 263. 2. Another crucial issue addressed was the allowance of deduction under section 10AA for manufacturing activities at the SEZ unit. The CIT questioned the Assessing Officer's approval of the appellant's claim without adequate investigation. The appellant contended that the trading activities qualified as a service under section 10AA, relying on a circular by the Government of India and the SEZ Act provisions overriding other acts. The ITAT referred to a similar case from A.Y. 2006-07 where the deduction was allowed for trading activities, supporting the appellant's claim. 3. The interpretation of the term "service" for deduction under section 10AA was extensively debated. The Revenue argued that the CIT(A) misinterpreted the legislative intent by allowing the deduction for trading activities without a specific clause in the Act. The ITAT, however, upheld the CIT(A)'s decision based on the SEZ Act provisions overriding the Income Tax Act, emphasizing that the trading activities qualified as a service under section 10AA. 4. The application of SEZ Act provisions overriding Income Tax Act provisions was a critical aspect of the judgment. The ITAT relied on the SEZ Act's Section 51, which provides that SEZ Act provisions prevail in case of contradictions. This statutory hierarchy was pivotal in determining the eligibility of the appellant for deduction under section 10AA based on trading activities at the SEZ unit. 5. The final issue revolved around the justification of the CIT(A) in allowing the appeal of the assessee. The ITAT upheld the CIT(A)'s decision, citing precedents and legislative provisions to support the deduction claim under section 10AA. The Revenue's appeal was dismissed, affirming the CIT(A)'s ruling in favor of the assessee. The judgment highlighted the importance of statutory interpretation and the hierarchy of laws in determining tax liabilities and deductions.
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