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TMI Blog2019 (2) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... ss funds available with the assessee and not immediately required for its business?" (iii) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in relying on the decision of the Hon'ble ITAT, Mumbai in assessee's own case for A.Y. 2011-12 by ignoring the facts that the Department has not accepted the said decision and appeal has been filed before The Hon'ble Bombay High Court and the same is pending. 3. At the outset, Ld. Counsel for the assessee submitted that the issue in grounds of appeal i.e. whether assessee is entitled for deduction u/s. 10AA of the Act on its trading activity and whether the interest earned on Fixed deposits kept with banks is business income or not has been decided by the Tribunal in assessee' own case for the A.Y 2011-12 in favour of the assessee in ITA.No. 1650/Mum/2015 and ITA.No. 2024/MUM/2015 dated 31.01.2017. Copy of the order is placed on record. 4. Ld. Counsel for the assessee referring to Para No. 4.3.3 of the said order arising out of the Revenue's appeal for the A.Y. 2011-12 submitted that the Tribunal allowed the claim of the assessee. Further referring to Para No. 7 of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed diamonds were merely immediately re-exported, therefore its claim for deduction under section 10AA was not allowable and is to be disallowed. In coming to this finding, the AO rejected the assessee's contention that the term 'services' as used in section 10AA(9) of the Act should be read as defined in the SEZ Act, 2005 which would override the provisions of section 10AA of the Act. 4.2.2 It is contended that this interpretation of the AO is erroneous as section 51(1) of the SEZ Act is a non-obstante clause and will override anything inconsistent therewith contained in any other law or instrument that may be in force. It is further contended that 'services' as defined in Rule 76 of the SEZ Rules, 2006 and the Explanation thereto state that the expression 'trading' shall mean import for the purpose of re-export and therefore the assessee was entitled to be allowed deduction under section 10AA as claimed. It is submitted that in identical factual circumstances as in the case on hand, the Coordinate Bench of the Tribunal in the case of; (i) Geetanjali Exports Corporation Ltd. & Others in ITA No. 6947/Mum/2011 dated 08.05.2013, following the decision of the ITAT, Jaipur Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation Ltd. & Others in ITA No. 6947/Mum/2011 dated 08.05.2013, wherein following the decision of the ITAT Jaipur Bench in the case of Goenka Diamonds and Jewellers Ltd. (ITA No. 509/JA/2011 dated 31.01.2012) it was held as under at para 22 thereof: - "22. We have heard rival submissions and considered them carefully. After considering the submission and perusing the material on record, ITA Nos.6947, 6948,6781,6783, 6785,6787,6949&6950/2011 15 we found no infirmity in the finding of the learned CIT(A). The finding of the learned CIT(A) have been recorded in para 2.2 & 2.3 at page 9 and 10, which are as under :- "I have carefully considered the findings of the Assessing Officer and submissions of the appellant. I have also gone through the relevant sections as well as provisions of SEZ Act and Circular NoAI2006 issued by the Government of India (Ministry of Commerce & Industry). The Assessing office has disallowed deduction u/s.10AA on the trading activity by the appellant from plot No.241, Unit No.374, situated in Surat SEZ areas because he was not agreeable with the arguments of the appellant that trading activity carried out by the appellant are red by service. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for deduction u/s.10M of the Act on goods imported and reexported from SEZ Act. However, no such deduction will be available on the local purchase and sales made by the Appellant and that is why Government has made it clear that local purchase and sale will not be entitled for benefit. Therefore, the Assessing Officer is directed to allow benefit and deduction u/s.10M of the Act on the import-export trading activity of the appellant. However, no such benefits should be given in the local purchase and sale made by the appellant. He should ensure this fact again while giving effect to this order. Hence, this ground of appeal is allowed." 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 was issued by Export Promo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and Jewellery Limited (supra). It is further noted that the main plank of argument of 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." 4.3.3. In view of the factual and legal matrix of the case as discussed above and following the decision of the Coordinate Bench of the Tribunal in the case of Geetanjali Exports Corporation Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al pronouncement that an identical issue was considered and adjudicated by the Coordinate Bench of the Tribunal in the case of M/s. Jewel Arts (ITA No. 642/Mum/2013 dated 30.09.2015) in favour of the assessee and against Revenue, following, inter alia, the decision of the Coordinate Bench in the case of Prestress Wire Industries (ITA No. 8418/Mum/2010 and 6312/Mum/2011 dated 31.01.2014). At para 3 to 6 thereof the Coordinate Bench in the aforesaid order has held as under: - "3. Briefly stated relevant facts of the case are that the assessee is an exporter of diamond jewellery and reported the earning of interest income out the fixed deposits kept with the banks by way of margin money for the purpose of assessee's business. The dispute arose on the treatment of the said interest income. Assessee considered the same as a 'business receipt'. Assessee claimed exemption u/s 10A of the Act in respect of the said interest receipts. Per contra, Revenue Authorities treated the same as "income from other sources‟ and denied the benefit of deduction u/s 10A of the Act. Aggrieved with the same, assessee is in appeal before us. 4. During the proceedings before us, Ld Counsel for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest received from fixed deposits kept as margin money for bank guarantees, Ld Counsel for the assessee mentioned that the temporary deployment of funds should be assessed as 'business income' and not as 'income from other sources' as treated by the Assessing Officer. In this regard, Ld Counsel relied on the following decisions. i) CIT vs. Vidyut Steel Ltd. 219 ITR 30 (AP) ii) CIT vs. Koshika Telecom Ltd 287 ITR 479 (Del) iii) CIT vs. Karnal Cooperative Sugar Mills Ltd 243 ITR 2 (SC) iv) CIT vs. Indo Swiss Jewells Ltd 284 ITR 389 (Bom) 15. On the other hand, Ld DR dutifully relied on the order of the AO. 16. We have heard both the parties and perused the orders of the Revenue Authorities as well as citations quoted by the Ld Counsel along with the relevant material placed before us. On perusal of the cited judgments of the higher judiciary, we find that they are relevant for the proposition that the there is no question of isolating the interest received on margin money paid for obtaining bank guarantee and assessing it as separate income under section 56. Therefore, agree with the view of the Tribunal that the income derived on the margin money for obtaining bank guarantee canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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