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2015 (8) TMI 126 - AT - Income TaxDisallowance of exemption U/s 10AA - No manufacturing activities were executed in premises of the assessee firm situated in SEZ on or before 31/10/2006 - CIT(A) allowed claim - Held that:- The assessee was issued first LOP vide letter dated 31/10/2003 for one year, which was later on extended for three years vide letter dated 06/12/2005. As per this letter, the assessee has to manufacture or produce the article/goods in SEZ unit on or before 31/10/2006. The AR has furnished the evidence for purchase of rough stones and had also furnished the evidence to issue for the same to the Karigars on 24/10/2006. The assessee has exported the goods on 28/10/2006 to M/s Fine Gems, New York, USA. These details were provided to the Assessing Officer during the assessment proceedings for A.Y. 2007-08. However, certificate of commencement of production issued by the Assistant Development Commissioner on 19/12/2011 were produced during the assessment proceedings for A.Y. 2009-10. - Without machinery the assessee could not have been started production but as claimed by the assessee that the assessee's activity is as such that it can be done by Karigars with the help of hand tools, which are made and carried by themselves. The assessee also produced the gate pass entry maintained by the SEZ authority to demonstrate that old Nageena machine was brought to the unit of the assessee. The final produce was exported by the assessee on 28/10/2006. The goods were shipped by flight NO. IC 612 dated 29/10/2006, which is evident from the noting on the back of the shipping bills. The invoice and shipping bill was duly signed by the Superintendent, Custom, Jaipur SEZ on 28/10/2006. Therefore, we are of the considered view that the ld CIT(A) was right to allow 10AA deduction in A.Y. 2007-08 and 2009- 10. - Decided in favour of assessee. Disallowances of interest - part of borrowed funds has been utilized in providing interest free loans to M/s Eros Exports - assessee, itself admitted that direct nexus between borrowings and advancing loan - CIT(A) deleted the addition - Held that:- There was no credit entry in the account as claimed by the assessee that there was a business transaction with the proprietory concern namely M/s Eros Craft. The ld CIT(A) has wrongly concluded that these payments were for business purposes. - the order of the ld CIT(A) is not justified. We confirm the order of the Assessing Officer. Further the assessee's claim that deduction U/s 10AA is to be allowed on disallowance of interest is not accepted as this income has not been derived from SEZ unit, therefore we reverse the order of the ld CIT(A) and confirm the order of the ld Assessing Officer. - Decided against assessee.
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