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2012 (3) TMI 258 - AT - Income TaxClaiming a deduction under Section 10AA - Special provisions in respect of newly established Units in Special Economic Zones - The AO examined the process through which the assessee is obtaining the finished products as against initial purchase items inferred that the assessee merely doing purchase and sale of goods and no manufacturing or processing was done as there were no machines or manufacturing set up - the assessee contented that is continuously engaged in the business of trading and manufacturing of precious and semi precious stones and the revenue itself has allowed deduction u/s 10AA in the immediately preceding year and has been granted letter of approval by the Development Commissioner, Surat u/s 15(9) of the SEZ Act to set up a unit for undertaking authorized operations of manufacturing and trading of the Diamond and Jewelery and the benefits u/s 10AA will be available to trading in the nature of re-export of imported goods- The assessee claims benefit under Section 10AA justifying its classification under service (referred to as "provide any service" under the said section). As the Income Tax Act does not define the term "service", the assessee company has to take reference to the definition of service referred to in the SEZ Act, 2005 (given that the Section 10AA was introduced by SEZ Act, 2005 and referred to in the Second Schedule to the said Act) and further the SEZ Act, 2005 has overriding effect on all other enactments by virtue of section 51 of SEZ Act, 2005. Held that :- Though vide Instruction no. 1/2006 dated 24-03-2006, it was clarified that trading units can be set up in the SEZ. However, the modification was made on 24-05-2006 in which it was made clear that the deduction u/s 10AA will be available in respect of the trading in the nature of re-export of imported good- Thus one will have to consider the implication of Section 51 of the SEZ Act , which says that it will have overriding effect over all the other laws. It means that anything in-consistent to the provision of the SEZ Act will not be considered. Thus the word services as mentioned in Section 10AA cannot be construed in-consistently with the definition of services given 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 - Appeal in the favour of assessee.
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