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TMI Blog2020 (9) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Commissioner of Income Tax (Appeals) 1, Ahmedabad arising out of the order dated 31.03.2016 passed by the DCIT, Circle-1(1)(1), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to the Act ) for Assessment Year 2012-13. 2. The assessee company having business dealing in fuel old and High Speed Diesel, also setting up and operating facilities in connection with planting, storage, delivery and other logistic operations for bunkering business, registered as a Special Economic Zone (in short SEZ ) Unit with Adani Port and Special Economic Zone Ltd. filed its return of income for A.Y. 2012-13 electronically on 30.11.2012 declaring a total income of ₹ 10,51,79,840/- after claiming deduction of ₹ 42,41,29,196/- under Section 10AA of the Act which was duly processed under Section 143(1) of the Act. Ultimately the assessment was finalized under Section 143(3) of the Act inter alia disallowing the claim of deduction under Section 10AA to the tune of ₹ 42,41,29,196/- and added back to the total income of the assessee. The assessee has not manufactured and/or produced articles or things or provided any services during the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has imported various fuel oil in bulk which were blended in the tanks hired by it at Mundra port as evident from the submission of the assessee before the AO. The relevant extract of the submission of the assessee is reproduced as under: The assessee company has made import of various fuel oil in bulk and out of such imports few quantity shall be blended at Mundra Port. Thus it shall carry the process of blending at Mundra Port. Further after blending the oil/fuel, the same shall be re-exported as bunker fuel supply to foreign run vessels different vessels as per their requirement, varying mainly in terms of Viscosity, sulfur and other parameters at ports of Gujarat. The assessee company has hired 7 tanks of different capacity for Fuel Oil storage from APSEZ The blending activity takes place at the time of import of cargo/ new arrival. The product being imported have the specification of i.g. B Grade. The product of B Grade is received in tank which already have the product of A Grade, hence the specs of Imported Cargo is changed to C Grade, when it is blended with A Grade cargo already in the tank. At the time of Import there remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to take a note of the fact that the deduction under section 10AA is also available to the assessee engaged in providing any services. As such we are inclined to elaborate the services eligible for deduction under section 10AA of the Act. 8.5 The word service has not been defined under the Act, therefore it is imperative to refer the definition of the services provided under the SEZ Act i.e. 2(z) of the Act which reads as under: (Z) services means such tradable services which (i) are covered under the General Agreement on Trade in Services annexed as IB to the Agreement establishing the World Trade Organisation concluded at Marrakesh on the 15th day of April, 1994. (ii) may be prescribed by the Central government for the purposes of this Act and (iii) earn foreign exchange; 8.6 Further, the rule 76 of Special Economic Zone Rules 2006 defines the services for the purpose of this section 2(z) of the SEZ Act which reads as under: 76. The services for the purposes of [1] [clause] (z) of section 2 shall be the following, namely:- Trading, warehousing, research and development services, computer software services, including informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer was that the benefit of Section 10AA of the Act is lost when the assessee is engaged solely in trading activities. It has been noticed above that Section 10AA(1) allows benefits, inter alia, for the provisions of any services by an eligible enterprise. Obviously, the erstwhile partnership firm i.e., M/s Midas International was permitted to do trading by the Competent authority. The firm got converted into assessee company and continued the same business with the prior permission from the Competent authority under the SEZ Act. the definition of service in the SEZ Act includes trading activity. In that view of the matter, it becomes manifest that the trading activity has been permitted by the Competent authority under the SEZ Act. As such, there can be no question of denial of exception us/s 10AA of the Act. The Ld. Counsel for the assessee has placed on record a copy of an order passed by the Jaipur Bench in DCIT Vs. Goenka Diamond Jewellers Ltd. It appeal No. 509(JP) of 2011 2012(050)- SOT-0307-TJAI in which it has been held that trading of the eligible goods entitles the se to the benefit of section 10AA of the Act. Similarly, the copy of another order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t services may be prescribed by the Central Government for the purpose of SEZ Act and services have been prescribed in rule 76 of SEZ rules. As per instruction No. 1/2006, dated 24-3-2006 issued on the basis of Board of Approval meeting held on 17-3-2006 on the issue of setting up trading units in the Special Economic Zone it was stated that rule 76 of SEZ rules would be confined to import of goods for export. Such instruction was modified vide instruction No. 4/2006, dated 24-5-2006. [Para 2.16] In the said instruction, a reference has been made to section 10AA. It is made clear to the entrepreneur having units in SEZ that benefit under section 10AA will exclude other trading except in the nature of re-export of imported goods. Thus, there is a promissory estoppel by the Government to the entrepreneur putting up the units in the SEZ that benefit under section 10AA will be available on trading in the nature of re-export of imported goods. [Para 2.17] Vide Instruction No. 1/2006, dated 24-3-2006 of Ministry of Commerce, it was clarified that trading units can be set up in the SEZ. Further, modification was made on 24-5-2006 in which it was made clear that the deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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