Common parlance test supports section 10AA deduction where a SEZ product remained a pendant despite being labelled a medallion.

Deduction under section 10AA was considered available where the assessee was an approved entrepreneur under the Special Economic Zones Act and earned export profits from goods manufactured in the SEZ. The dispute concerned whether the finished article, described as a medallion, complied with the approval conditions for pendants. Applying common parlance because neither term was defined in the relevant enactments, the Tribunal treated the product as a pendant in substance and held that the use of the label "medallion" did not amount to breach of approval conditions. The purity of the gold did not change the article's essential character, and the disallowance was held unsustainable.

---

---

Issues: Whether the assessee was entitled to deduction under section 10AA of the Income-tax Act, 1961 in respect of its export profits, despite the Revenue's objection that the unit had manufactured medallions rather than pendants and had allegedly not complied with the SEZ approval conditions.

Analysis: Deduction under section 10AA is available to an entrepreneur approved under the Special Economic Zones Act, 2005 for profits derived from export of articles or things manufactured or produced in the SEZ. The assessee had approval under section 15(9) of the Special Economic Zones Act, 2005 and remained an approved entrepreneur within section 2(j). The dispute turned on the description of the finished product. Since "pendant" and "medallion" were not defined in the taxing or SEZ enactments, their meaning had to be gathered from common parlance and usage. On that basis, the finished article was held to be a form of pendant, and the mere use of the nomenclature "medallion" did not establish breach of the approval. The Tribunal also held that the purity of the gold did not alter the essential character of the article as a pendant or medallion.

Conclusion: The assessee was entitled to deduction under section 10AA, and the disallowance was unsustainable.

---