2016 (11) TMI 952 - AT - Income Tax

Eligibility of deduction under section 10AA - Held that - We find the claimed deduction under section 10AA of the Act was started in 2007 for which approval was granted by CSEZ Development Commissioner, permitting the assessee to establish the unit at SEZ to undertake its trading activity. The assessee purchases item like cigarettes and foreign liquor, beside other foreign suppliers, from Flamingo DFS Pvt. Ltd. and from Flamingo Duty Free Shop Pvt. Ltd. having their registered office at Navi Mumbai. These two concerns import the item from abroad and Flamingo got the licence to operate duty free shops at various air ports/sea ports in India and also has bonded warehouses in different cities in India wherever its duty free shops. The purchases made by the assessee are by way of high seas purchases wherein the goods are sold by Flamingo to the assessee, while the cargo is on the high seas. These are done through high seas sales contract. The necessary documents were duly examined by the learned Commissioner of Income-tax (Appeals) and this factual matrix is not controverted by the Revenue. Original bill of lading, bill of entry were also examined. The purchases were made on the high seas and not in India. There is not a single instance where the local purchases were made within India.The totality of facts/provisions of SEZ Act and SEZ Rules provides that the benefit of section 10AA is available on trading. The ratio laid down in Gitanjali Exports Corporation Ltd. 2013 (11) TMI 563 - ITAT MUMBAI supports the case of the assessee. - Decided in favour of assessee MAT computation - Held that - Since we have upheld the claimed deduction under section 10AA of the Act in favour of the assessee there is no question of adding the same while computing the book profit under section 115JB of the Act. Thus we find no merit in the appeal of the Revenue.

Summary

Issues:
1. Eligibility for deduction under section 10AA of the Income-tax Act, 1961.
2. Deletion of addition while computing book profit under section 115JB of the Act.

Issue 1: Eligibility for deduction under section 10AA of the Income-tax Act, 1961:
The case involved the Revenue's appeal against the order of the Commissioner of Income-tax, Mumbai, regarding the eligibility of the assessee for deduction under section 10AA of the Income-tax Act. The assessee claimed deduction amounting to &8377; 48,78,973 under section 10AA, stating engagement in the trading service of import and export of goods from the Special Economic Zone (SEZ). The Assessing Officer disallowed the deduction and taxed it under normal provisions of the Act. The appellate authority considered various decisions and ruled in favor of the assessee, emphasizing that the purchases were made on the high seas and not within India. The Tribunal upheld the Commissioner's decision, citing relevant judicial pronouncements and provisions of the SEZ Act and SEZ Rules supporting the eligibility of the assessee for the deduction under section 10AA.

Issue 2: Deletion of addition while computing book profit under section 115JB of the Act:
The next ground of contention was the deletion of the addition while computing book profit under section 115JB of the Act. The Tribunal noted that since the claimed deduction under section 10AA was upheld in favor of the assessee, there was no basis for adding the same while computing the book profit under section 115JB. Consequently, the Tribunal found no merit in the Revenue's appeal and dismissed it. The judgment was delivered on July 13, 2016, in the presence of the learned Departmental representative after considering the arguments presented by both parties during the hearing.