TaxTMI 
TaxTMI 
2022 (7) TMI 840
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.... Assessing Officer (AO) observed that the assessee had declared income of Rs. 1,20,08,272/- which was claimed as deduction under section 10AA of the Act, however, the AO did not allow the same, since his predecessor had disallowed the claim for AY 2012-13. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved by the action of Ld. CIT(A), the assessee is in appeal before us. 4. We have heard both the parties and perused the records. We note that Assessee is engaged in the import and export of diamonds after sorting and grading which is in the nature of trading activities and has set-up a registered unit in the SEZ, Surat. In this assessment year, the Assessee claimed deduction u/s 10AA of the Act which was denied by AO on the plea that Assessee is neither manufacturing any goods nor producing any goods for export [which was the view of AO's predecessor which the present AO has followed]. On appeal, the Ld. CIT(A) confirmed the action of AO. Before us the Assessee challenges the denial of deduction u/s 10AA of the Act in respect of its trading activities (import & export of diamonds) from its SEZ Unit. So we need to ....
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....ct, shall mean import for the purposes of re-export.] 5. From a plain reading of the aforesaid provision, it is clear that the term 'service' is given an inclusive definition which includes 'trading activity.' As per the first explanation trading will be treated as "service" if it is related to the import of the goods for the purpose of the export. In this case there is no dispute that goods imported by the assessee are in fact exported to other countries from its unit at Special Economic Zone. 6. We note that the exemption provided u/s. 10AA which are special provision in respect of newly established units in Special Economic Zone are for income received by providing any services. The other activity entitled for exemption is income from manufacturing and production of article or thing. So what has to be seen is whether the "service" definition given in the SEZ Rules as above reproduced can be read into for the purpose of claiming exemption u/s. 10AA of the Act; so that assessee can avail the benefit envisaged u/s. 10AA of the Act. We note that sec. 51(1) of The Special Economic Zones Act, 2005 gives an overriding provision over other laws which read as under: "51.(1....
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....iamond Exports an overriding effect to the extent that it makes clear that if there is any inconsistency between the SEZ Act and rules framed thereunder and any other law, the provisions of SEZ Act and rules framed thereunder would prevail. In the aforesaid circumstances, in the absence of definition of 'services' under Section 10AA of the Act, 'services' as defined under the SEZ Act and rules framed thereunder would be relevant. As discussed earlier, the definition of 'services' under the SEZ Act and rules framed thereunder encompasses trading activity also. Therefore, import of diamonds for re-export though, may be in the nature of a trading activity, but is certainly in the nature of 'services', hence would qualify for deduction under Section 10AA of the Act. In the case of Goenka Diamonds & Jewellers Ltd. (supra), the Tribunal, after examining the provisions of Section 10AA of the Act vis-à-vis the SEZ Act and rules framed thereunder, had concluded that since the definition of 'services' under the SEZ Act also includes trading activity, the activity relating to import of diamonds for re-export would qualify for deduction under Sect....
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....essee are allowed. 9. Coming to ground no.5 which is against the action of the Ld. CIT(A) in not granting deduction under section 10AA of the Act in respect of Foreign Exchange Gains. 10. Brief facts is that the AO noted that the assessee had shown Net Profit of Rs. 1,20,08,272/- mainly because of Foreign Exchange Gains on outstanding debtors and creditors. The AO was of the opinion that since the assessee did not have any business of trading (no purchase and sale transaction) of Diamonds in the relevant year under consideration, the assessee was not eligible for deduction under section 10AA of the Act. On appeal, this view of the AO was confirmed by the Ld. CIT(A). Aggrieved, the assessee is in appeal before us. 11. We have heard both the parties and perused the records. It is admitted fact that the assessee is a trader in Diamonds which imports Diamonds for re-export after sorting and grading. It is also an admitted position that the assessee has set up a registered unit in the Special Economic Zone, (SEZ) Surat which is governed by the SEZ Act. Section 10AA of the Act has been inserted by virtue the SEZ Act, 2005 which is a special provision for newly established units ....
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....o deduction under s. 10A in respect of foreign exchange gain of Rs. 98,38,801/- which pertained to the sales made by the assessee in the previous year (i.e. AY 1999-2000) relevant to the AY 2000-01 [Relevant assessment year before the Ld. CIT(A)] 13. On appeal before the Tribunal, the Tribunal held in favour of the assessee (Renaissance Jewellery Pvt. Ltd.) by holding as under: "We have carefully considered the submissions made before us by both the sides and have gone through 'the provisions of law 'and the precedents relied upon by the learned counsel for the assessee. In our view, this issue is covered' in assessee's favour by several cases relied upon by the learned counsel for the assessee and discussed above. There is no material difference between the requirement of s."80HHC and s. 10A. The profit on account of foreign exchange gain is directly referable to the articles and things exported by the assessee. Such profits are therefore in the same nature as the sale proceeds and there is no reason while deduction, under s. 10A should not be allowed in respect of such exchange gain. Therefore, we vacate the order of the learned CIT(A) on this issue. 14. Further, t....