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TMI Blog2018 (10) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 10AA, we deem it fit to restore the matter back to the file of Ld. AO to examine and verify the financial results reflected by the assessee in Deepak Gems (SEZ) since the same was not delved into by Ld. AO on account of the fact that the assessee was not eligible to claim the deduction u/s 10AA. The Ld. AO is directed to verify the financial results of the assessee reflected in the aforesaid unit and if found satisfactory, grant deduction thereof as per assessee’s claim. - I.T.A. No.248/Mum/2017 - - - Dated:- 10-10-2018 - SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Assessee : Suchek Anchaliya, Ld. AR For The Revenue : Ram Tiwari, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year [AY] 2012-13 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-30 [CIT(A)], Mumbai, Appeal No.CIT(A)-30/19(1)/363/15-16 dated 06/10/2016 by raising the following effective grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, where the Ld. CIT(A) erred in allowing the deduction u/s 10AA of the Act, 1961. 2. On the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry provisions as contained in Income Tax Act as well as SEZ Act, 2005 , Ld. AO reached a conclusion that the definition of Service, as defined by Finance Act, 2012 would mean an activity carried out by one person for another and that too for consideration and since the assessee was not engaged in providing services in the said manner, the benefit of Section 10AA was not available to the assessee. The Ld. AO also reached a conclusion that unless specifically stated, the meaning of service could not be derived from SEZ Act, 2005 unlike the term manufacturing which expressly derived its meaning from SEZ Act. Finally, the aforesaid deduction was denied to the assessee. 3. Aggrieved, the assessee reiterated the contentions with success before Ld. CIT(A) vide impugned order dated 06/10/2016 where Ld. CIT(A), after due consideration of factual matrix and placing reliance on several judicial pronouncements, concluded the matter in assessee s favor by observing as under:- 6.3 I have carefully considered the rival contentions on the issue, perused the material on record and also the applicable legal position. Appellant claimed deduction of ₹ 4,91,01,525/- on the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 27 of SEZ Act further clarifies that the provisions of Income Tax Act in force for the time being, shall apply to, or in relation to, developer or entrepreneur for carrying on the authorized operation in SEZ unit subject to modifications specified in the Second Schedule. In other words, the provisions of Income Tax Act will be applicable subject to the modifications specified in Second Schedule. Second Schedule defines the word manufacture has same meaning as assigned to it in Section 2(r) of SEZ Act. Various definitions including manufacture given in section 10AA is nothing but definitions provided u/s 2 of SEZ Act, 2005. That the word service has not been defined in section 10AA of IT Act as well as second schedule but as whatever definitions provided in section 10AA have been imported from second schedule of SEZ Act, which is the origin of section 10AA, the definition of services can also be taken from SEZ Act. As already discussed section 51 of SEZ Act is an overriding provision and, therefore, anything which is not in consistency with the SEZ Act cannot be taken from any other Act. Section 2(z) of SEZ Act defines the word service as (i) tradable service which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out any manufacturing activity but has done trading of goods only. For this purpose, learned AO has placed reliance on the order of Hon ble Delhi High Court. Learned CIT(A) has taken into consideration these observation of the AO and thereafter he found that the Government of India has issues a circular No. 17 of 29.5-2006, which was issued by Export Promotion Council for EOUs SEZ Unit (Ministry of Commerce Industry, Government of India). The contents of the Circular have also been incorporated in the finding of the learned CIT(A), which have also been reproduced somewhere above in this order. Therefore, we are not repeating the contents of that circular issued by the Ministry of Commerce Industry, Government of India). Under Section 51(1) of the SEZ Act, it has been clearly provided that the provision of this Act has overriding effect in case of contradiction between the SEZ Act and other Act. Hence, by virtue of Section 51 of the SEZ Act, the provision of SEZ Act and rules will have overriding effect over the provision contained in any other Act. Learned CIT(A) has taken into consideration this circular issued by Government of India and the provision of Section 51 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Tribunal in the case of Goenka Diamonds and Jewellery Limited (supra) and in view of the reasoning given by the learned CIT(A), we confirm his order. b. Also in the case of M/s Diamond R US vs. CIT, Central III (ITA No. 2793/Mum/2012 , the Hon ble ITAT, Mumbai Bench allowed the deduction u/s 10AA of the Act on profit from import for the purpose of re-export of goods. We find that similar issue came up in A.Y. 2006-07 in assessee s own case wherein following the decision of the ITAT in ITA No. 509/JP/2011 in the case of Goenka Diamond Jewellers Ltd. The issue has been decided in favour of the assessee by observing as under: - We noted that learned CIT(A) has taken into considering the aspect and observation of the AO that deduction under section 10AA is not allowable for the reason that the assessee has not carried out any manufacturing activity but has done trading of goods only. For this purpose, learned AO has placed reliance on the order of Hon ble Delhi High Court. Learned CIT(A) has taken into consideration these observation of the AO and thereafter he found that the Government of India has issues a circular No.17 of 29.5.2006, which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Goenka Diamonds and Jewellery Limited (supra). It is further noted that the main plank of argument f learned DR is that rules provided under the SEZ Act cannot partake the character of the Section of the Income Tax Act. We find that in the SEZ Act under Section 51, it has been clearly provided that the provision of SEZ Act will override the provision of any other Act, meaning thereby the provision provided under the SEZ Act has to override on the provision of Section 10AA of the Income Tax Act. Under the rules, it is not provided but under Section 51 of the SEZ Act, it is provided, therefore, in our view, the contention raised by the learned DR is not tenable. Moreover, the issue is squarely covered by the decision of the coordinate Bench in the case of Goenka Diamonds and Jewellery Limited (supra). Therefore, respectfully following the decision of the Tribunal in the case of Goenka Diamonds and Jewellery Limited (supra) and in view of the reasoning given by the learned CIT(A), we confirm his order. 6. Nothing contrary was brought to our knowledge on behalf of Revenue. The fact being similar, following the same reasons we uphold the order of the CIT(A) who has allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EZ unit and there is no manipulation in the appellant case. The Ld. AR time and again stated that the trading in the nature of import for the purpose of Re-export in the SEZ is covered under the definition of Services as defined in SEZ Act, 2005 and there is no doubt that entire purchase in SEZ unit is imported goods and all these goods have been subsequently exported to the foreign countries. 6.11 The assessee has 100% export turnover from the SEZ unit during the current F.Y. The appellant has submitted the details of import and export in the paper book. Therefore, there is no doubt that the appellant has imported the goods and subsequently exported the same goods after value addition. Even the AO did not doubted the genuineness of the imports which were subsequently exported from the SEZ unit. 6.12 In view of the above, respectfully following the decisions of the jurisdictional Benches of the Hon ble ITAT, Mumbai and the Hon ble Jaipur Bench of the Tribunal in the cases cited above, trading in the nature of import for the purpose of Re-Export in the SEZ is covered under the definition of Services as defined in SEZ Act, 2005, hence the appellant is eligible for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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