DIAMONDS ' R'US,MUMBAI vs. CIT -III, MUMBAI

आदेश / O R D E R

PER SHAILENDRA KUMAR YADAV, JM These are cross appeals filed by the assessee and Revenue against the order dated 29.03.2012 passed by CIT (Central III), Mumbai and it pertains to A.Y. 2007-08. 2. The following grounds were urged by the assessee: - “1. On the facts and in the circumstances of the case and in law, the Id. CIT has erred in passing the order u/s. 263 of the Act which is bad in law and without jurisdiction.

5. The learned CIT ought to have appreciated that the decision arrived at by the Assessing Officer cannot be made subject- matter of revision unless the Assessing Officer has adopted a view which is impossible or unsustainable in law.”

“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified, in allowing the appeal of the assessee, as the Ld CIT(A) has failed to appreciate that the word "service " neither for the purposes of entire Income Tax Act nor for the restricted purpose of allowing relief under section I0AA ,is not defined in the Income tax Act 1961 or in section IOAA and hence the AO has interpreted the word "service" as per the meaning attributable to it as per common parlance and has correctly disallowed the relief.

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified, in allowing the appeal of the assessee, as the Ld CIT(A) has failed to appreciate the intention of the Legislature, not to accord the benefit of deduction u/s 10AA to the trading activity of the type, practiced by the assessee by specifically choosing, not to include a clause ,facilitating the borrowing of the meaning of the words "trading" or "service" from the SEZ Act. 4 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified, in allowing the appeal of the assessee, as the Ld CIT(A) has failed to appreciate that the three words "manufacturing " "produce " and "providing of services " used in section 10AA should be interpreted in continuity and coherently to put into effect the spirit and intention of the Legislature in bringing in the deduction under section 10AA, in the Income tax Act 1961 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified, in allowing the appeal of the assessee , as the Ld CIT(A) has failed to appreciate that the relied on decision of the ITAT Jaipur Bench in the case of DCIT Vs Goenka Diamonds and Jewellers Ltd (ITA No-509/JP/2011 dated 31.01.2012, is not accepted by the department and appeal u/s 260A has been authorised by the CC1T Jaipur and also in the case of M/s.Gitanjali Exports Corp. Ltd. (ITA No.69478 & 6948/Mum/2011). is not accepted by the department and appeal u/s.260A has been authorised by the CIT Cent.-I, Mumbai.

6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified, in allowing the appeal of the assessee, as the Ld CIT(A) has failed to appreciate, that as per the Hon'ble Rajasthan HC decision in the case of Kota Co-operative Marketing Society Vs CIT 207 ITR 608 (Raj), the Court had held that the exemption clause in the tax statute, should be construed strictly and cannot be extended beyond the clear language used in the section.”

Government of India). The contents of the Circular have also been incorporated in the finding of the learned CIT(A), which have also been reproduced somewhere above in this order. Therefore, we are not repeating the contents of that circular issued by the Ministry of Commerce & Industry, Government of India). Under Section 51(1) of the SEZ Act, it has been clearly provided that the provision of this Act has overriding effect in case of contradiction between the SEZ Act and other Act. Hence, by virtue of Section 51 of the SEZ Act, the provision of SEZ Act and rules will have overriding effect over the provision contained in any other Act. Learned CIT(A) has taken into consideration this circular issued by Government of India and the provision of Section 51 of the SEZ Act and found that trading done by the assessee is a service and, therefore, deduction under Section 10AA is allowable. We further noted that on similar facts in case of Goenka Diamonds and Jewellery Limited (supra), the Jaipur Bench of the Tribunal has discussed the issue in detail. The provisions of Section 51 of SEZ Act were also considered. The decision of the Hon’ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed Under The Special Court, reported in the case of 211 CTR 369 (SC) and the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd., reported in 238 CTR 142 (Delhi), were also taken into consideration and thereafter it was concluded that in view of the Instruction No.1 of 2006, dated 24- 3-2006 as modified by Instruction No.4 of 2006, dated 24- 5-2006 issued by the Ministry of Commerce & Industry, Government of India and the definition of service given in the SEZ Act, 2005, which overrides the word ‘service’ accruing in Section 10AA by virtue of Section 51 of the SEZ Act. The assessee engaged in trading in nature of re-export of imported goods and for the same the assessee was entitled deduction under Section 10AA of the Act. Facts are similar before us, as the assessee is engaged in trading of re-export of imported goods and, therefore, the assessee is entitled for deduction under Section 10AA of the Act. All the arguments advanced by the learned DR before us have also been taken care of by the Tribunal while discussing the appeal in the case of Goenka Diamonds and Jewellery Limited (supra). It is further noted that the main plank of argument of learned DR is that rules provided under the SEZ Act cannot partake the character of the Section of the Income Tax Act. We find that in the SEZ Act under Section 51, it has been clearly provided that the provision of SEZ Act will override the provision of any other Act, meaning thereby the provision provided under the SEZ Act has to override on the provision of Section 10AA of the Income Tax Act. Under the rules, it is not provided but under Section 51 of the SEZ Act, it is provided, therefore, in our view, the contention raised by the learned DR is not tenable. Moreover, the issue is squarely covered by the decision of the coordinate Bench in the case of Goenka Diamonds and Jewellery Limited (supra). Therefore, respectfully following the decision of the Tribunal in the case of Goenka Diamonds and Jewellery Limited (supra) and in view of the reasoning given by the learned CIT(A), we confirm his order.”

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