TMI Blog2015 (10) TMI 2559X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee - ITA No. 365/JP/2012, ITA No. 384/JP/2013 - - - Dated:- 30-10-2015 - SHRI R.P. TOLANI, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri G.G. Mundra, CAa For The Revenue : Shri M.S. Meena , CIT- DR ORDER PER VIKRAM SINGH YADAV:- Both these appeals have been filed by the assessee against two separate orders of the ld. CIT-1, Jaipur dated 28-03-2012 and 25-03-2013 for the assessment years 2007-08 and 2008-09 u/s 263 of the Act respectively. 2.1 The grounds raised by the assessee in both the appeals are as under:- ITA No. 365/JP/2012 A.Y. 2007-08 1. That the invoking of provisions of Sec. 263 of the I. T. Act, 1961 in case of the appellant by the Ld. CIT was without jurisdiction, wrong and bad in law. 2. That on the facts and in the circumstances of the case the Ld. CIT is wrong, unjust and has erred in law in holding that the assessment completed by the assessing officer on 10.12.2009 u/s 143 (3) of the I. T. Act, 1961 in case of the appellant was erroneous on facts and in law and prejudicial to the interest of revenue on the ground that the Assessing officer has wrongly allowed deduction of ₹ 34954102/- claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, the returned income of the assessee was accepted by the AO vide his order u/s 143(3) of the Act dated 10-12-2009. During the course of assessment proceedings, the AO vide his letter No. DCIT/Cir-2/2008-9/Firm raised the following query from the assessee company u/s 142(1) of the Act:- 15. Give a note on admissibility of deduction u/s 10AA claimed with supporting. In response to query raised by the AO, the assessee firm submitted its reply as under ( as part of Paper Book) :- 1. The assessee firm is continuously engaged in the business of trading and manufacturing of precious and semi precious stones, diamond studded gold jewellery and also dealing in shares and securities. During the year under assessment the firm has established an unit in Special Economic Zone, Surat, Gujarat. A copy of letter of permission issued by the Development Commissioner, Ministry of Commerce, Govt.of India, Surat SEZ,Sachin, Surat is enclosed. . 15. The Section 10AA of the I.T. Act, 1961 provides for exemption to newly established units in special economic zones on or after 01-04-205. The primary conditions are as follows:- (a) Assessee should be entrepreneur (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total profit of the business is interpreted as total turnover of the SEZ undertaking and total profit of SEZ undertaking respectively and accordingly deduction u/s 10AA has been claimed by the assessee. 5. Subject to our observation in para 4 and above, we are of the opinion and to the best of our knowledge and according to the explanation given to us, the particulars given in Annexure A are true and correct. 3.2 Further the reply of the assessee to the subsequent query raised by the DCIT , Circle- 2, Jaipur is as under ( as part of Paper Book):- With respect to further points at the last hearing the case regarding availability of exemption u/s 10AA of the I.T. Act, 1961 for the trading activities of the assessee firm submits as under:- 1. The assessee firm has been granted a letter of approval (LOA) by the Development Commissioner, Surat u/s 15(9) of the SEZ Act , 2005 to set up a unit for undertaking the authorized operations of manufacturing and trading of the Diamond and jewellery as mentioned in the LOA. (Please refer the LOA dated 10-02-2006 submitted alongwith earlier letter filed with Department. 2. As per the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution services (excluding retail services), educational services, environmental services, financial services, hospital services, other human health services, tourism and travel related services, recreational, cultural and sporting services, entertainment services, transport services, services auxiliary to all modes of transport, pipelines transport. The Ministry of Commerce,Govt. of India has issued a notification dated 10-08-2006 which inter alia introduced an explanation which defined the word trading Trading for the purpose of the Second Schedule of the Act, shall mean import for the purpose of re-export. Similarly, the Ministry of Commerce, Govt. of India has also clarified vide instruction no. 4/2006 that the trading activities will be allowed to carry out all forms of trading activity but the benefits u/s 10AA will be available to trading in the nature of re-export of imported goods. A copy of said instruction enclosed. The said instruction is also made available on the web site of Govt. of India www.sezindia.gov.in The assessee firm thus fulfills all the primary conditions of section 10AA for getting the deduction i.e. The assessee firm is a entre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Hence, the definition of services as provided in SEZ Act can not be applied to IT Act. The reliance is also placed on the following decisions wherein it is held that the definition of expression is one statute cannot be automatically applied to another statute. 1. CIT Vs. Vasan Publication (P) Ltd. 159 ITR 381 (Mad) 2. CIT Vs. Buhari Sons (P) Ltd. 144 ITR 12 (Mad.) 3. Laxmanda Pranchand Ors Vs. Union of India Ors 234 ITR 261 (M.P.) 4. CIT Vs. R.J. Trivedi Sons, 183 ITR 420 (MP) 4.2.2 A service is an interconnection between the provider and the client that creates and captures value. The trading cannot be considered as service. 4.2.3 The assessee has emphasized that section 10AA was inserted in the I. T. Act, 1961 by the SEZ Act, 2005 and not by the Finance Act. Thus, according to assessee, 10AA originates from the SEZ Act, and hence it will determine provision of section 10AA. Further, it is also mentioned that section 51 of the SEZ Act, says that it will have overriding effect over the other laws. Therefore the definition of service providing in the SEZ Act should be used for the purpose of sec. 10AA. These arguments of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and I. T. Act. 4.2.5 Further, as per Sec. 51 of the SEZ Act 2005, the provisions of this Act will have overriding effect over other laws but it will be so only in the matters related to implementation of the SEZ Act. It can not have overriding effect on the provisions of IT Act, 1961 in the manner related to this Act. The SEZ Act made provisions of Sec. 10AA in the IT Act and did not include the definition of service as per its section 2 (z) in this section 10AA. If now Sec, 51 of SEZ Act is used to insert this definition in the IT Act it will be violative of the SEZ Act itself. 4.2.6 It may further be noted that this meaning to the expression trading has been given through the Rules but in the main SEZ Act in the Second Schedule the terms services and trading have not been included under definitions of section 10AA of the IT Act at all. It is a well settled principle of law that something which is not provided in the main legislation (i.e. and Act) cannot be provided through a subordinate legislation (i.e. Rules). Thus when the definition of service as provided in SEZ Act is not included in Section 10AA of the IT Act then it cannot be applied for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same time, the ld. CIT had mentioned in his order that though the decision of ITAT is binding but since the ITAT is not the final authority to decide the legislative issue. Therefore, the decision of ITAT is yet to achieve finality and hence, he did not consider the same. So, it is clear that Coordinate Bench has taken a view (though in case of another assessee) on similar facts that deduction u/s 10AA of the Act is available in respect of trading activity. In that view of the matter, the view taken by the AO is therefore, in line with the view taken by the Coordinate Bench and it is a plausible view. It is clearly a case where AO has taken a point of view and the ld. CIT has taken a different point of view. Thus in this light of the matter, we are of the considered view that the view taken by the AO cannot be held to be erroneous and prejudicial to the interest of revenue. In this regard, the decision of Hon'ble Apex Court in the case of Malabar Industrial Ltd. vs. CIT (2000) 243 ITR 83 (SC) is an authority on the subject. Further reference is drawn to the explanation u/s 263 of the Act wherein the term record has been defined which means record shall include and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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