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2022 (7) TMI 840 - AT - Income TaxDeduction u/s 10AA - assessee is a Diamond Trader and does its activities from its unit situated in the Special Economic Zone (SEZ), Surat - AO denied claim 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] - HELD 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. 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. From the reading of the provisions it is clear that the provisions as specified under The Special Economic Zones Act, 2005 would have overriding effect on the Income Tax Act because Special Economic Zone Act, 2005 is a Special Act and a later Act of the Parliament.”Be that as it may be, it has been brought to our notice by the Ld. AR that in the previous year (AY 2012-13), the AO had disallowed the deduction claimed by the assessee under section 10AA of the Act. (1st year) which was confirmed by the Ld. CIT(A). However, this Tribunal [2019 (11) TMI 513 - ITAT MUMBAI] was pleased to allow the same. In the light of the aforesaid decision of this Tribunal on the issue of deduction claimed under section 10AA of the Act, we respectfully following the same, allow the claim of assessee. Therefore, these grounds of appeal of assessee are allowed. Deduction under section 10AA of the Act in respect of Foreign Exchange Gains - HELD THAT:- We find that the Assessee which has set-up its registered unit at SEZ and which is eligible for claiming deduction u/s 10AA of the Act, is in receipt of Foreign Exchange Gain which is derived from the export business. Then according to us, Foreign Exchange Gain derived from the export business has be given the benefit of deduction u/s 10AA of the Act. The reasons is that when the profit and gains are allowable as deduction under section 10AA of the Act, the Foreign Exchange Gain which is derived/related to the export/sale consideration and which has first degree nexus with the export/sale consideration must get the benefit of deduction under section 10AA of the Act. Therefore, we allow the claim of the assessee .
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