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2016 (9) TMI 1516 - AT - Income TaxAddition u/s 68 - AO noticed that the assessee company had issued shares to two Indian Companies and to a non-resident Indian settled in Hong Kong - CIT(A) deleted the additions so made by the AO - HELD THAT:- We find that the learned CIT(A) has given a well-reasoned finding. The assessee has not only furnished confirmation letter from Mr. Ashish Jain but also the evidence in the shape of certificate of foreign inward remittance issued by Standard Chartered Bank in this respect. CIT(A) has categorically held that not only the identity of the share holder but also the receipt of money by the assessee from Mr. Ashish Jain through banking channel has been proved. CIT(A) has also observed that the assessee has also filed a statement of net worth of Mr. Ashish Jain duly certified by his auditors. We do not find any infirmity in the above well-reasoned order of the CIT(A) - Decided against revenue. Deduction u/s. 10A in respect to the Surat unit regarding which the impugned disallowance has been made by the AO has been withdrawn by the assessee and the corresponding income has been offered for taxation in the return of income filed u/s. 153C pursuant to the search action carried out in the case of Group Company. Since the assessee itself has offered the income in the subsequent return filed u/s. 153C of the Act, this ground of appeal becomes infructuous and does not need any adjudication. Addition account of valuation of closing stock - CIT-A deleted addition - HELD THAT:- Method for valuation of stock adopted by the assessee is one of the recognized methods as per the Accounting Standards. The said method has been consistently followed by the assessee. It has also been explained that the inventory was being valued at lower of cost or market value as per the accounting principles. It has also been explained that the gold jewellery is being sold or exported in domestic and overseas market on the basis of the prevailing market rates at the time of the transaction. Assessee has further submitted that the stock register was also being maintained and the tax audit report has also been submitted. Further any addition in the value of closing stock at the end of the year will increase the corresponding opening stock at the beginning of the next financial year. CIT(A) therefore has rightly held that the addition to the closing stock made by the AO on the basis of market price of the raw material after the year ending on 31.03.2005 was not sustainable in the eyes of law Deduction u/s. 10AA in respect of its Chennai unit - denial of claim as appellant had not manufactured the goods (in terms of the provisions of sec. 10AA) - as observed that the convertible foreign exchange was not brought into India within the time of six months as envisaged in the section and appellant filed Form No. 56F required for claiming the deduction u/s. 10AA only during the assessment proceedings - HELD THAT:- In the case in hand the assessee has allegedly imported raw material/gold and exported the jewellery. It is not the case that the assessee has offered /provided any services to itsoff shore customers. The assessee, in fact, had obtained services of third party for getting the jewellery manufactured. The incentives under the provisions of the Act are available on the offer or for providing of services and not for taking the services from a third party. Event it is not that each or any service can be provided by a unit in SEZ to get benefits. What services can be carried out to avail the benefits by the units situated in the SEZ has also been mentioned under the provisions of ‘SEZ Rules 2006’. As discussed above, even the assessee has not been authorized to provide any services from its SEZ unit. Hence the contention of the Ld. AR that the assessee is entitled to deduction U/s 10AA because it is providing services is not tenable. Claim of the assessee is required to be examined in the light of the provisions of SEZ Act/ SEZ Rules and also the provisions as envisaged in SEZ scheme 2007 to 2009 as referred to in the approval letter of the Development Commissioner dated 21.09.2005. A perusal of the order of the AO and the impugned order of the CIT(A) reveals that the lower authorities have not examined the issue in the light of the provisions of SEZ Act/ SEZ Rules and other related provisions. The impugned order of the CIT(A) is therefore set aside and the matter is restored on this issue to the file of the AO for decision afresh after giving reasonable of being heard to the assessee in the light of the above stated SEZ Act/Rules and case laws as may be available or relied upon.
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