2023 (6) TMI 736 - AT - Income Tax

Deduction u/s. 10AA - Trading activity - In the nature of services or not - activities of import of goods for re-export - HELD THAT - As from the conjoint reading of the definition of service and Rule 76 it is unambiguously clear that activity of trading falls within the meaning of services as defined under section 2(z) of SEZ Act. The letter dated 20/06/2011 from the office Development Commissioner, SEEPZ SEZ has further clarified that In terms of explanation to Rule-76 of the SEZ Rules, 2006, the expression trading for the purpose of the Second schedule of the SEZ Act, 2005 shall mean import for the purpose of re-export . The above clarification given by the Ministry of Commerce Industries leaves no element of doubt that the activity of import of goods for the purpose of export falls within the meaning of services. Activities carried out by the assessee falls within the ambit of services , the expression used in section 10AA and the profits and gains derived from such services rendered from SEZ would be eligible for deduction u/s.10AA of the Act. As decided in Goenka Diamond Jewellers Ltd 2012 (3) TMI 258 - ITAT JAIPUR 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 - Decided against revenue.

Summary

Issues involved:
The judgment involves an appeal by the Revenue against the orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2015-16 and 2017-18, concerning the eligibility of the assessee for deduction under section 10AA of the Income Tax Act, 1961.

Issue 1 - Assessment Year 2015-16:
The Revenue challenged the CIT(A)'s decision to allow the assessee's claim of deduction under section 10AA of the Act. The dispute centered around whether the assessee's trading activities, specifically import and re-export of goods, qualified as "services" under the SEZ Act. The CIT(A) reversed the Assessing Officer's disallowance of the deduction, citing relevant case law and the definition of services under the SEZ Act.

The assessee contended that its trading activities fell within the definition of services as per the SEZ Act, supported by a letter from the Development Commissioner authorizing trading and services at the SEZ. The Tribunal analyzed the definition of services under the SEZ Act and Rule 76 of the SEZ Rules, concluding that trading activities, including import for re-export, constituted services eligible for deduction under section 10AA of the Act. Citing precedents and the SEZ Act provisions, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 2 - Assessment Year 2017-18:
The grounds raised by the Revenue for this assessment year mirrored those of 2015-16, with both sides acknowledging identical facts. The representatives agreed that the arguments presented for 2015-16 applied equally to this year. Consequently, the Tribunal upheld the impugned order based on the findings from the previous assessment year, dismissing the Revenue's appeal for 2017-18 as well.

In conclusion, the Tribunal dismissed the Revenue's appeals for both Assessment Years 2015-16 and 2017-18, upholding the CIT(A)'s decisions in favor of the assessee.