JEWELS MAGNUM,COIMBATORE vs. ACIT, COIMBATORE

आयकर अपीलीय अिधकरण “बी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI

माननीय +ी वी. दुगा1 राव, �ाियक सद3 एवं माननीय +ी मनोज कुमार अ8वाल ,लेखा सद3 के सम:। BEFORE HON’BLE SHRI V. DURGA RAO, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकरअपील सं./ ITA No.52/Chny/2016 (िनधा1रण वष1 / Assessment Year: 2010-11) M/s. Jewels Magnum The ACIT बनाम/ 333, 1st Floor, Big Bazaar Street, Circle-III, Vs. Coimbatore-641 001. Coimbatore. थायीलेखासं./जीआइआरसं./PAN/GIR No. AAGFJ-3110-Q (अपीलाथ-/Appellant) : (./थ- / Respondent) अपीलाथ-कीओरसे/ Appellant by : Shri B.Ramakrishnan (FCA) – Ld. AR ./थ-कीओरसे/Respondent by : Ms. Ann Mary Baby -Ld. CIT-DR सुनवाईकीतारीख/ : 26-10-2022 Date of Hearing घोषणाकीतारीख / : 30-11-2022 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

2 ITA No. 52/Chny/2016 deduction u/s 10AA. The grounds raised by the assessee read as under: 1. The order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that manufacture of Gold Medallions amounted to 'Manufacture' under the provisions of the Act. 3. The Learned Commissioner of Income Tax (Appeals) failed to note that the appellant is a registered SEZ Unit under the SEZ Act and hence would be entitled under Section 10AA of the Act as it had complied with all the conditions prescribed in the said section. 4. The Learned Commissioner of Income Tax (Appeals) erred in adopting the definition of the term 'Manufacture' as provided under section 2(29BA) of the Act to decide whether there has been manufacture or not when section 10AA makes reference to section 2(r) of the SEZ Act, 2005 to define 'Manufacture' which is very wide in nature. 5. The Learned Commissioner of Income Tax (Appeals) failed to note that the definition of the term 'Manufacture' under section 2(r) of the SEZ Act is very wide to cover process like cutting, polishing, blending, repair, remaking, re-engineering etc., and that the manufacture of Gold Medallions from raw gold would certainly amount to 'Manufacture' under the said section and was therefore wrong in denying exemption under section 10AA of the IT Act. 6. The Learned Commissioner of Income Tax (Appeals) failed to note that the appellant had subjected the raw gold to various processes that amounted to 'Manufacture' as defined under section 2(r) of the SEZ Act which brings into existence a new product having distinctive name, character or use and hence erred in disallowing the exemption rightly claimed by the appellant. 7. Even assuming but without conceding that the Learned Commissioner of Income Tax was right in adopting the term 'Manufacture' as provided under 2(29BA) of the IT Act instead of section 2(r) of the SEZ Act, 2005, erred in interpreting the provisions of section 2(29BA) of the Act without appreciating the differentiation bought to his notice by the appellant during the course of the proceedings. 8. The Learned Commissioner of Income Tax (Appeals) failed to note that the appellant had manufactured Gold Medallions out of raw gold through series of processes like sheet rolling, punching, correction, polishing and embossing which amounted to manufacture even within the meaning of the definition of the term 'Manufacture' under section 2(29BA) of the Act while it is anyway covered under section 2(r) of the SEZ Act. 9. The Learned Commissioner of Income Tax (Appeals) failed to note that Gold in raw form and Gold Medallions are two different and distinct commodities in the market and have different saleable value. 10. The Learned Commissioner of Income Tax (Appeals) failed to understand the purpose of manufacture of Gold Medallions which are mainly sold as gift articles with fine finish while gold in raw form do not assume such character and both are therefore completely different commodities. 11. The Learned Commissioner of Income Tax (Appeals) failed to note that Gold Coins/Medallions are considered as different commodity from that of raw gold in as much as Gold Coins/ Medallions and raw gold fall under different tariff entries under the

3 ITA No. 52/Chny/2016 Customs Tariff and Central Excise Tariff which supports the position that they are different and distinct commodities. 12. The Learned Commissioner of Income Tax (Appeals) erred in relying on the Judgments of the Hon'ble Supreme Court which are not relevant to the facts of the Appellant and which were pronounced when the Act did not contain a definition for the term 'Manufacture and without considering the provisions of the SEZ Act and are therefore not supportive in coming to a conclusion that manufacture of Gold Medallions does not amount to 'Manufacture' under the Act. 13. The Learned Commissioner of Income Tax (Appeals) erred in concluding that there is no value addition to attain the end product since gold bar retains the character of gold as medallions without recognizing the various processes involved in manufacture of medallions particularly when medallions demand a higher price in the market than the raw gold which justifies the value addition made to it. 14. The Learned Commissioner of Income Tax (Appeals) failed to appreciate even if the manufacture of medallions does not amount to 'Manufacture' under the Income Tax Act, the appellant would be entitled to exemption u/s 10AA of the Act in as much as the appellant had engaged in 'services' as required u/s 10AA of the Act, which term has been defined u/s 2(z) of the SEZ Act, 2005 read with Rule 76 that covers 'trading' by way of import of goods for export. 15. The Learned Commissioner of Income Tax (Appeals) while relying on CBDT Circular No.693 dated 17-11-1994 which deals with cut and polished granites and which provides that because of the value addition to rough granite it cannot retain the character of minerals and hence eligible for deduction under section 80HHC of the Act, ought to applied the same in favor of the appellant when there has been substantial value addition in terms of value realization in the case of gold medallions when compared to raw gold. 16. The Learned Commissioner of Income Tax (Appeals) thus went wrong completely under all grounds and erred in denying the claim of exemption u/s 10AA of the Act and wrong application of the legal precedence. 2. The Ld. AR, at the outset, submitted that similar issue stood covered in assessee’s favor by the decision of this Tribunal in assessee’s own case for AYs 2011-12 & 2012-13, ITA Nos.2311 & 2312/Mds/2015 common order dated 19.02.2016. The Ld. AR further submitted that revenue’s appeals against the said order have already been dismissed by Hon’ble High Court of Madras in TCA Nos. 260 & 261 of 2018 dated 09.09.2020. The copies of the orders have been placed on record. The aforesaid position could not be disturbed by revenue. In the above background, the appeal is disposed-off as under. 3. Upon perusal of case records, it could be seen that similar issue of deduction u/s 10AA was decided in assessee’s favor by the co-ordinate

4 ITA No. 52/Chny/2016 bench in its order for AYs 2011-12 & 2012-13, ITA Nos.2311 & 2312/Mds/2015 passed on 19.02.2016. When the assessee’s appeal for AY 2010-11 came up for hearing before another coordinate bench, the bench differed with the adjudication of earlier bench and opined that the controversy was required to be resolved by larger bench in terms of provisions of Sec.255(3). Accordingly, a recommendation for constitution of special bench was made to Hon’ble President vide order dated 08.06.2016. In the meantime, revenue’s appeal against Tribunal’s common order for AYs 2011-12 & 2012-13 stood dismissed by Hon’ble High Court of Madras in its judgment dated 09.09.2020. Consequently, the comments of bench were sought by Hon’ble President. After hearing the parties on 26.07.2022, the bench forwarded its comments on 28.07.2022. The bench, noticing the decision of Hon’ble High Court of Madras in assessee’s own case, placed the matter before Hon’ble President for taking an appropriate action. Considering the comments of the bench, Hon’ble President, vide order dated 26.08.2022, declined for constitution of a special bench and directed the matter to be placed before the regular bench for hearing and determination of disputes. Accordingly, this appeal has been placed before us for adjudication. 4. We find in assessment order passed u/s 143(3) on 06.03.2013, the assessee was denied deduction u/s 10AA against its SEZ unit at Gem and Jewellery Complex, MEPZ-SEZ, Tambaram, Chennai. The assessee was engaged in converting gold bar into gold medallions. The Ld. AO held that the said process would not amount to manufacture within the meaning of Sec.2(29BA). Accordingly, the deduction was denied. The Ld. CIT(A) confirmed the action of Ld. AO against which the assessee is in further appeal before us.

5 ITA No. 52/Chny/2016 5. We find that this issue stood squarely covered in assessee’s favor by the decision of this Tribunal for AYs 2011-12 & 2012-13, ITA Nos.2311 & 2312/Mds/2015 common order dated 19.02.2016. The revenue preferred further appeal against the same before Hon’ble High court of Madras which was dismissed in TCA Nos. 260 & 261 of 2018 dated 09.09.2020 (120 Taxmann.com 316) as under: - 8. We have gone through the order passed in W.P.No.13538 of 2015 and found that it was not the only ground on which the writ petition was allowed and the Court has also given a specific finding that the medallion is termed as a piece of jewellery in the shape of a medal worn as pendant. More importantly, the learned Writ Court has referred to the letter of the Customs Department dated 12-3-2014, addressed to the Assistant Development Commissioner of MEPZ, SEZ, wherein they have clarified that medallions are also pendants. This was also taken note of by the learned Writ Court and quashed the order of penalty imposed by the Development Commissioner under the provisions of the Foreign Trade (Development and Regulations) Act 1992. Thus, the basis or the substratum, based on which the assessment was completed denying the benefit to the assessee, did not no longer survive. That apart, what is required to be seen for extending the benefit under section of the 10AA Act is, to see whether the assessee is an entrepreneur as referred to, defined under section 2(j) of the Special Economic Zone Act. No doubt, the assessee falls within the said definition, as they had been granted a Letter of Approval by the Development Commissioner under section 15(9) of the Special Economic Zones Act. That apart, the competent authority who intends to certify as to what would be the date of commencement of production, would be the Development Commissioner and not the Income-tax Officer. Even in the order dated 3-9-2014, imposing penalty on the assessee, which was subsequently quashed, the Development Commissioner has recorded that the date of commencement of production as 14-4-2009. This date is binding on the Income-tax Department, as the competent authority to certify the date of production is the Development Commissioner and not the Assessing Officer. 9. It was pointed by Mr. R. Sivaraman, leaned counsel appearing for the assessee/respondent that the assessee has fullfiled the terms and conditions of the Letter of Approval and the nett foreign exchange earning of the assessee for the years 2010, 2011, 2012 & 2013 is Rs.74.49 crores. 10. Considering all these facts, we are of the view that the relief granted by the Tribunal by interpreting as to what is the pendant and medallion, cannot be interfered in an appeal filed under section 260-A of the Act. The argument of Mr. T. R. Senthil Kumar, learned Senior Counsel appearing for the Revenue, that the issue goes to the root of the matter is not acceptable because of the subsequent developments that had taken place in the writ petition filed by the assessee, being allowed by this Court and the order of penalty imposed by the Development Commissioner being set aside. The reason for setting aside the order of penalty imposed on the assessee, is that the assessee has not violated the terms and conditions of the Letter of Approval and that the medallion is also classifiable as a pendant.

6 ITA No. 52/Chny/2016 11. Thus, for the above reasons, we find no grounds to disturb the findings of the Tribunal. In the result, both the appeals filed by the Revenue are dismissed and the substantial questions of law are answered against the Revenue. No costs.

Respectfully following the binding judicial precedent, we direct Ld. AO to grant the deduction u/s 10AA as claimed by the assessee. 6. The appeal stand allowed. Order pronounced on 30th November, 2022.

Sd/- Sd/- (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) �ाियक सद3 /JUDICIAL MEMBER लेखा सद3 / ACCOUNTANT MEMBER

चे=ई / Chennai; िदनांक / Dated : 30-11-2022 EDN/- आदेश की \ितिलिप अ8ेिषत/Copy of the Order forwarded to : 1. अपीलाथ-/Appellant 2. ./थ-/Respondent 3. आयकर आयुC (अपील)/CIT(A) 4. आयकर आयुC/CIT 5. िवभागीय .ितिनिध/DR 6. गाडH फाईल/GF