AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1829
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....ction u/s. 10AA of the Act for Rs.60,04,827/-. Thereafter case was selected for scrutiny and notice u/s. 143(2)/142(1) of the Act was issued upon assessee. Subsequently assessment was framed u/s 143(3) of the Act at a total income of Rs.60,90,498/- after disallowing the deduction u/s. 10AA of the Act. 4 The assessee, for the year under consideration has shown inter alia the income from (i) trading activities (ii) warehousing activities and (iii) consultancy activities. The assessee derived all the aforesaid income from its units located at Falta Special Economic Zone (FSPEZ). During the course of assessment proceedings AO observed that the income from trading activity is not eligible because as per the provision of Section 10AA of the Act the assessee should be engaged in the manufacture/production of articles or things or providing services. And since the assessee is only importing various items and after storing it at the small space owned by it in FSPEZ subsequently sell to some other countries. So, assessee is only doing purchase and sale which activity can only be termed as trading and not manufacturing. The AO also noted that assessee failed to establish before him through a....
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....in respect of the aforesaid incomes claimed exemption under section 10AA of the Act. The AO denied the exemption under section 10AA of the Act for all the aforesaid incomes. The AO observed that trading activity is not entitled for exemption under section 10AA of the Act. According to AO, neither the assessee was engaged in manufacturing or production of article or thing nor was the assessee able to show that it's trading activity can be characterized as services as required by sec. 10AA of the Act. Moreover, necessary documents were not furnished before him in support of warehousing and consultancy income, therefore, he disallowed the assessee's claim. Before the ld. CIT(A) the assessee submitted that AO has raised no dispute with regard to applicability of the provision of Sec. 10AA of the Act in relation to service income. It was contended before the Ld. CIT(A) that as per the Special Economic Zone Act 2005 and its Rules, 2006, definition of service included trading activity by virtue of its Rule 76 under Chapter VIII of Special Economic Zones Rules 2006. It was pointed out to Ld. CIT(A) that the view of AO that the definition of the term 'service' as specified in SEZ Act cannot....
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....the Special Economic Zone Act 2005. As per Rule 76 of the SEZ Rules 2006 the term "service" includes trading activities if it relates to the import of the goods for the purposes of export in terms of its explanation to Rule 76 of 2006. The relevant provisions of SEZ Rules 2006 read 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 information enabled services such as back-office operations, call centres, content development or animation, data processing, engineering and design, graphic information system services, human resources services, insurance claim processing, legal data bases, medical transcription, payroll, remote maintenance, revenue accounting, support centres and web-site services, off-shore banking services, professional services (excluding legal services and accounting) rental/leasing services without operators, other business services, courier services, audio-visual services, construction and related services, distribution services (excluding retail services), educational services, environmental services, fin....
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....t objection of the Assessing 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 assesssee to the benefit of section 10AA of the Act. Similarly,....
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....ies can change the character of the transaction. We note that the assessee has raised the invoice for the warehousing and handling charges as evident from the invoice placed on page 29 of the paper book. The AO/Ld. CIT(A) has not pointed out any defect in the bill, payment of the bill and the FIRC in support of the income. Hence, in our considered view the accounting entries cannot form the sole basis for denying the exemptions on account of warehousing charges to the assessee. As stated earlier, when warehousing activity has been included in the definition of 'service' as per Rule 76 of SEZ Rules of 2006, therefore, the income from warehousing qualifies for exemption under section 10AA of the Act and we allow the claim of the assessee. 13. Thirdly, coming to consultancy income, we note that the exemption was denied on the consultancy charges due to non-production of the necessary details. The consultancy services were provided for the purpose of marketing support of overseas customers. According to assessee, Consultation charges income are intrinsically linked with and part and parcel of the normal import-export trading activity carried out by the assessee from SEZ. Thus, accordi....