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ACIT, Circle-2, Jaipur Versus M/s Goenka Diamonds & Jewellers Ltd.

2015 (6) TMI 165 - ITAT JAIPUR

Deduction U/s 10AA - CIT(A) allowed claim - Held that:- The word services as mentioned in Section 10AA cannot be construed inconsistently 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. - Decided against revenue.

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y not only take the business decision but also involve in the manufacturing proceeding which they performed at Surat. Therefore, we find that apportionment of salary among the taxable and non-taxable unit is rightly done by the ld Assessing Officer and confirmed by the ld CIT(A). Accordingly, we uphold the order of the ld CIT(A). - Decided against assesse. - ITA No.645/JP/2012, CO No.54/JP/2012 - Dated:- 23-4-2015 - R P Tolani, JM And T R Meena, AM,JJ. For the Appellant : Mrs Rolee Agarwal, CIT .....

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s condition laid down in the section 10AA of the I.T. Act, 1961 for claiming the deduction are not fulfilled." Ground in Assessee's C.O. "That on the facts and in the circumstances of the case, the learned CIT(A) is wrong, unjust and has erred in law in upholding disallowance of directors remuneration to the extent of ₹ 1406790/- from profits of domestic unit of the appellant on the alleged ground and directors are doing work of both SEZ and domestic unit of the company." .....

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eduction U/s 10AA of the Act with respect to Surat Unit. The assessee is actually running three units (i) Surat (ii) Mumbai and (iii) head office at Jaipur where no manufacturing set up is made. The Assessing Officer gave reasonable opportunity of being heard on Surat Unit that claim of deduction U/s 10AA of the Act is as per law or not. The assessee filed explanation vide letter dated 17/10/2011, which has been reproduced by the Assessing Officer on page Nos. 2 to 7 of the assessment order. The .....

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n of Section 10AA includes services of on site development of computer software (including services for development of software) outside India. This explains the intention of the legislature regarding what nature of services will be included in services. The assessee is not in manufacturing activity as it is not having machinery set up to do so. Moreover, it is merely engaged in trading which is import and export without any value addition which cannot be termed under services. Hence the assesse .....

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disallowed the claim of the assessee. The assessee has debited various expenses in the P&L account and had not segregated as per SEZ Unit and Mumbai Unit but it had been claimed wholly in the Mumbai Unit to inflate the profit in SEZ unit particularly remuneration to the Directors, therefore, she gave the another opportunity to apportion the expenditure between the units. The assessee submitted that Surat Unit was controlled by the employees and managers from Surat. However, policy decisions .....

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rused the order of the A.O. and submissions of the AR. alongwith the assessment order in the case of the assessee for A.Y. 2008-09. For A.Y. 2008-09, the matter was decided on same facts by ITAT, Jaipur Bench in the case of the appellant. After a detailed discussion it was observed that as per section 51 of the SEZ Act it is mentioned that notwithstanding anything inconsistent therewith contained in any other law for time being in force or in any instrument having effect by virtue of any law oth .....

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ng that is export of imported goods was held to be services and the assessee was allowed the deduction u/s 10AA of the I.T. Act. The A.O. in her order in A.Y. 2009-10 has given the same facts and arguments as discussed in the order for A.Y. 2008-09. No new facts or arguments have been brought on record to controvert the finding of the Hon'ble ITAT, Jaipur Bench in the case of the assessee. As this ground of appeal and issues raised during this A.Y. are covered by the finding of the Hon'b .....

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n the meaning of Section 10AA of the Act, who has set up a unit as per SEZ Act read with Section 10AA of the Act. As per Section 10AA, 100% deduction on profit and gain derived from export of things and articles manufactured or produced or providing services for a period of five consecutive assessment years. The definition of manufacturing in Section 10AA has been assigned to it in clause (2) of SEZ Act, 2005, which includes polishing as manufacturing activity. The service word has been defined .....

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ffect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." The ld AR further relied on the decision of Hon'ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed under the Special Court (2007) 293 ITR 369 and the Hon'ble Supreme Court had interpreted this language that the law of the said Act will prevail over the Income Tax Act. He f .....

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a Vs. M/s. Mahabir Vegetable Oils (P) Ltd. - 2011-TIOL-24-SC-CT had an occasion to consider the applicability of promissory estoppel on public authorities. In the case before Hon'ble Apex Court, the state of Haryana in Industrial Policy for the period 01-04-1988 to 31-03- 1997 promised to give incentive by way of sales tax exemption for the industries set up in backward areas of the State. Schedule III appended to the Rules provides for a negative list of the industries and at the initial st .....

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6, though the draft rules were circulated on 03-01-1996. It will be useful to reproduce the head note of this case. "It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppels: It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is .....

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considerations of "honesty and good faith"? Why should the Government not be held to a high "standard of rectangular rectitude while dealing with its citizens"? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations; but, let it be said to the eternal glory of this Court, this doctrine was emphatically negative and the supremacy of the rule of law was established. It .....

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trading in the nature of reexport of imported good. Thus the assessees were promised that they will be eligible for deduction u/s 10AA of the Act in respect of the profit earning on trading of reexport of imported goods. The revenue has not been able to show us that such instruction was not withdrawn or the Board has issued instruction that instruction dated 24-05- 206 from the Ministry of Commerce will not be applicable for the purpose of allowing exemption u/s 10AA of the Act. Hence, in view o .....

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r the Special Court, 293 ITR 369 had an occasion to consider the meaning of language employed in Section 13 of the Special Court Act. In Section 13 of the Special Court Act, it was stated that provision of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The Hon'ble Apex Court held that there can be no manner of doubt that the provision of Special Court Act wherever they are applicable shall prevail over the pro .....

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AA cannot be construed inconsistently 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. 3. In the result, the appeal of the revenue is dismissed." The facts and circumstances of this case are identical, therefore, by respectfully .....

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ot concur with the submissions of the AR. It is perceived that the directors are also the promoters of the company and therefore the ultimate responsibility for the financial success of operations of all the units of the company rests with them and it is to this end that hefty salaries are being paid to them. Given the scale of the business operations of the company it is true that they may not have been employed with the day to day operations of a particular unit but they cannot abdicate respon .....

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