TaxTMI 
TaxTMI 
2015 (10) TMI 2559
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....aw and prejudicial to the interest of revenue on the ground that the Assessing officer has wrongly allowed deduction of Rs. 34954102/- claimed by the appellant u/s 10AA of the I. T. Act, 1961 alleging the deduction claimed by the assessee firm pertains to the profits derived 'purely from trading activity' while the profits derived by assessee firm were from the export of services in accordance with section 10AA of I. T. Act, 1961." ITA No. 384/JP/2013 - A.Y. 2008-09 ''1. That the invoking of provisions of Sec. 263 of the I. T. Act, 1961 in case of the appellant by the Ld. CIT was without jurisdiction, wrong and bad in law. 2. That on the facts and in the circumstances of the case the Ld. CIT is wrong, unjust and has erred in law in holding that the assessment completed by the assessing officer on 21.12.2009 u/s 143 (3) of the I. T. Act, 1961 in case of the appellant was erroneous on facts and in law and prejudicial to the interest of revenue on the ground that the Assessing officer has wrongly allowed deduction of Rs. 70751730/- claimed by the appellant u/s 10AA of the I. T. Act, 1961 alleging the deduction claimed by the assessee firm pertains to the profits derived 'pure....
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....zones on or after 01-04-205. The primary conditions are as follows:- (a) Assessee should be entrepreneur (i.e. person who has granted approval by Development Commissioner) as per Section 2(j) of SEZ Act, 2005 (b) Units should begin to manufacture or produce articles or things or provide any services during the previous relevant to any assessment commencing on or after 01-04-2006 (c) Assessee should export his goods or services by any mode physical or otherwise. As submitted above the assessee firm is an approved unit of SEZ duly authorized by the competent authority i.e. Development Commissioner, Ministry of Commerce, Govt. of India, Surat SEZ, Sachin, Surat. A copy of said approval letter is enclosed at point no. 1 of this letter. The assessee firm's entire purchases are import. The entire goods are exported to foreign country. Further the assessee firm also fulfills all other terms and conditions laid down in Section 10AA of the I.T. Act , 1961 and as such deduction is claimed as per provisions of law.'' The ld. AR of the assessee company submitted Form No. 65 (see Rule 16D) vide his letter dated 30th Oct. 2007 indicating therein as under ( as par....
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.... alongwith earlier letter filed with Department. 2. As per the provisions of Section 10AA of the I.T. Act, 1961, a unit is entitled to get exemption for manufacturing and trading. The relevant portion of Section 10AA is reproduced below:- 10AA. (1)Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 2 of the Special Economic Zones Act, 2005 from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, a deduction of (i) hundred per cent of profits and gains derived from the export of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter: The word services have been defined in sub clause (z) of section 2 of SEZ Ac....
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....lls all the primary conditions of section 10AA for getting the deduction i.e. The assessee firm is a entrepreneur (i.e. person who has granted approval by Development Commissioner) as per sec. 2(j) of SEZ Act, 2005. (a) The unit has provided services (trading i.e. import for the purpose of re-export only) during the previous year relevant to assessment year under consideration. (b) Assessee firm has exported goods or services by filing bills of entry/shipping bill in physical mode. In view of the above, `if imported goods are exported by a unit duly approved of Development Commissioner of concerned SEZ. The assessee firm's entire purchases are import. The entire goods are exported to foreign country. Further the assessee firm also fulfills all other terms and conditions laid down in Section 10AA of the I.T. Act, 1961and as such deduction is claimed as per provisions of law and allowable as such..'' 3.3 The case of the assessee was taken up by the ld. CIT who passed the order u/s 263 of the Act by holding that the assessee is not entitled to claim deduction u/s 10AA of the Act on purely trading activity. The relevant extract of the observations....
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.... SEZ Act should be used for the purpose of sec. 10AA. These arguments of assessee are complete mis-construction of the legal position. Sec 10AA was introduced in the IT Act, by SEZ Act, 2005 only as a matter of legislative convenience. This does not mean that one can provide for something which the legislature did not want to provide in Sec. 10AA of the IT Act. The legislature intended only to use the definition of 'manufacture' from the SEZ Act and not the definition of 'Service'. If it had intended to do so it would have said so for definition of 'service' also as it did for 'manufacture'. Since 'service' as defined in SEZ Act is not to be used for the purpose of section 10AA of the IT Act, therefore the definition of service as per Rule 76 of SEZ Rules 2006 can also not be used for the purpose of section 10AA. In this respect the following head note from the decision of CIT V/s Buhari Sons Pvt. Ltd. (Madras High Court) (1983) 144 ITR 12 is reproduced below, and relied on : "It is well established that in the absence of any definition in the statute, words occurring in a statute will have to be understood with reference to the objects of the Act and in the context in whi....
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....tion 10AA of the IT Act then it cannot be applied for the purpose of this section. 4.2.7 The assessee has also placed reliance on the decision of Hon'ble ITAT, Jaipur Bench in the case of Goenka Diamond & Jewels Ltd. (ITA No. 509/P/11 order dated 31.01.2012) for A.Y. 2008-09. Though the decision of Hon'ble ITAT is blinding but since the ITAT is not the final authority to decide a legislative issue. Therefore, the decision of Hon'ble ITAT is yet to achieve finality. 4.3 Therefore, keeping in view the above facts & discussion it is clear that the assessee is not entitled to claim deduction u/s 10AA of the I. T. Act on purely trading activity. Hence, the matter is referred back to the file of the AO for examining the issue afresh in the light of above discussion after Offering reasonable opportunity of being heard to the assessee. 3.4 The ld. AR relied on the order of the AO while the ld. DR relied on the order of ld. CIT who passed the order u/s 263 of the Act. 3.5 We have heard the rival contentions and perused the assessment order and the ld. CIT's order u/s 263 of the Act. On perusal of order of the AO as well as submission filed before the AO during the as....