TaxTMI 
TaxTMI 
2018 (10) TMI 1109
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....1 on 27/03/2015 wherein the income of the assessee has been assessed at Rs. 600.91 Lacs after certain adjustments as against returned income of Rs. 70.60 Lacs filed by the assessee on 29/09/2012. As evident from grounds of appeal, the sole subject matter of the appeal is assessee's eligibility to claim deduction u/s 10AA on trading activities carried out by him during impugned AY. 2. The brief facts are that the assessee being resident individual engaged as diamond importers, exporters, traders and manufacturers reflected income of Rs. 491.01 Lacs from his proprietorship concern namely Deepak Gems (SEZ) and claimed deduction u/s 10AA for the same amount in the return of income. This deduction was being claimed for the first time. Accordingly, the assessee was asked to substantiate his eligibility to claim the aforesaid deduction. The assessee, vide replies dated 09/03/2015 23/03/2015 justified the same. The relevant extract of the replies have already been reproduced in the quantum assessment order, the perusal of which reveal that the assessee set up its activities in Special Economic Zone [SEZ] from 30/12/2011 which was approved by SEZ authority. The assessee was engaged in the ....
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....ok the same from Finance Act, wherein services are defined as any activity carried out by a person for another person for consideration. According to the AO the provision of services is inserted for software development companies who render services to foreign clients which are trading activity in nature. Whereas, Ld.AR, contended in the written submission filed during the present proceedings, which were reproduced in the above Para 6.2, the impugned addition is totally unsustainable on facts and in law. Ld. AR has invited the attention to the definition of Service as per SEZ Act and contends that all the conditions for claiming deduction u/s 10AA of the Act are satisfied. The services definition as per section 2(1)(z) of SEZ Act includes trading warehousing research and development services ....etc., and in the explanation it is stated that 'The expression "trading", for the purpose of the Second Schedule of the Act, shall mean import for the purposes of re-export'. Looking into the definition of word 'service' and since the appellant is engaged in the business for the purpose of re-export, which is considered as a service activity as per the definition of SEZ Act, which supersede....
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.... provides that expression "trade" for the purpose of second schedule of the Act shall mean import for the purpose of re-export. Thus the explanation makes it clear that for second schedule of SEZ Act "which is nothing but section 10AA of IT Act", the trading means re-export of imported goods. Since section 10AA owes its genesis to SEZ Act, services as defined in SEZ Act and as are authorized and permitted by SEZ Act should qualify. In that view of the matter, in my considered opinion trading which is in the nature of re-export of imported goods should qualify as export of services. What the word 'services' is understood in common parlance has no significance while deciding the claim of deduction u/s 10AA of the Act. 6.5 Ld. AO relied on following case law in support of his arguments: CIT vs. Vasan Publication (P) Ltd 159 ITR 381 (Mad) CIT vs. Buhari Sons (P) Ltd 144 ITR 12 (Mad) Laxmanda Pranchand & Ors VS. Union of India & Ors 234 ITR 261 (M.P.) CIT vs R.J. Trivadi & Sons, 183 ITR 420 (M.P.) Whereas, the Ld. AR pointed out that the above case laws cite by the Ld. A.O. has been thoroughly discussed by the Hon. ITAT, Jaipur Bench in the case of Goenka Diamond and J....
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.... Custodian Appointed Under The Special Court, reported in the case of 211 CTR 369 (SC) and the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd., reported in 238 CTR 142 (Delhi), were also taken into consideration and thereafter it was concluded that in view of the Instruction No.1 of 2006, dated 24-3-2006 as modified by Instruction No.4 of 2006, dated 24-5-2006 issued by the Ministry of Commerce & Industry, Government of India and the definition of service given in the SEZ Act, 2005, which overrides the word 'service' accruing in Section 10AA b virtue of Section 51 of the SEZ Act. The assessee engaged in trading in nature of re-export of imported goods and for the same the assessee was entitled deduction under Section 10AA of the Act. Facts are similar before us, as the assessee is engaged in trading of re-export of imported goods and, therefore, the assessee is entitled for deduction under Section 10AA of the Act. All the arguments advanced by the learned DR before us have also been taken care of by the Tribunal while discussing the appeal in the case of Goenka Diamonds and Jewellery Limited (supra). It is further noted that the main plank o....
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.... 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 SEZ Act and found that trading done by the assessee is a service and, therefore, deduction under Section 10AA is allowable. We further noted that on similar facts in case of Goenka Diamonds and Jewellery Limited (supra), the Jaipur Bench of the Tribunal has discussed the issue in detail. The provisions of Section 51 of SEZ Act were also considered. The decision of the Hon'ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed Under The Special Court, reported in the case of 211 CTR 369 (SC) and the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd., reported in 238 CTR 142 (Delhi), were also taken into consideration and thereafter it was concluded that in view of the Instruction NO.1 of 2006, dated 24-03-2006 as mo....
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....en in the SEZ Act. Under the SEZ act, the trading is included in the services provided the trading is export of imported goods. We therefore, feel that the assessee is entitled to deduction u/s 10AA of the Act and therefore, the Ld. CIT(A) was justified in allowing the exemption. 6.7 From the above case laws and decisions, it is emerged that, section 10AA was inserted to the IT Act referring to SEZ Act, 2005 where in some sections of the SEZ Act, has overriding effect over all the other Acts. Trading in the nature of import for the purpose of Re-Export in the SEZ is covered under the definition of Services and can be applied for the purpose of definition of "Services" to the provisions of section 10AA of the Act. 6.8 The Ld. AR also pointed out that the Instruction 4 of 2006 dated 24-05-2006 issued by Dept. of Commerce was kept on hold by Dept. of Commerce vide another Instruction No.5 dated 31-05-2006. However, the Ld. AR stated that Instruction No.5 dated 31-5-2006 has been withdrawn with immediate effect vide another Instruction No.7 dated 14-11-2006. The Ld. AR submitted the copy of Instruction No.7 dated 14-11-2006 in paper book and it is noticed that the said Instructio....
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....od squarely covered in assessee's favor by catena of judgments, few of which have been relied upon by Ld. first appellate authority. 5. We have carefully heard the rival contentions and perused the impugned order including judicial pronouncements as cited before us. The basic facts are not in dispute. The short question before us is that whether or not trading activity as carried out by the assessee during impugned AY would constitute service in terms of Section 10AA so as to enable him to claim deduction under the said Section. The perusal of impugned order reveals that Ld. first appellate authority, in the process of adjudication, has placed reliance in several decision of this Tribunal which could be tabulated as follows:- (i) Gitanjali Export Corp. Ltd. Vs. ADIT [ITA Nos. 6947 & Others /Mum/2011 dated 08/05/2013 Mumbai Tribunal] (ii) Diamond 'R' US Vs. CIT [ITA 2793/Mum/2012 Mumbai Tribunal] (iii) Goenka Diamond & Jewellery Limited [146 TTJ 68 ITAT Jaipur] In all the above decisions, the Tribunal has taken a consistent view that keeping in view the over-riding effect of the provisions of Section 51 of the SEZ Act, 2005, the term service for the purpose of Section 10A....