The Income Tax Appellate Tribunal(ITAT), Mumbai Bench, has recently in an appeal filed before it, held that imported goods re-exported by a unit duly approved by development commissioner of the concerned SEZ, is allowable for exemption u/s 10 aa of the Income Tax Act, 1961.
The aforesaid observation was made by the Tribunal when cross appeals were preferred before it by the assessee and the Revenue, as directed against the order of the Commissioner of Income Tax (Appeals)-25, Mumbai, (CIT (A)), vide the common order dated 30.01.2014 for the Assessment Year (AY) 2010-11.
The brief facts of the case being that the assessee was a partnership firm, which filed its return of income on 13.10.2010, declaring the total income at Rs. Nil by claiming deduction amounting to Rs. 13,13,66,314/under section 10AA of the Income Tax Act, 1961, a survey action under section 133A of the Act was conducted on 21.09.2010.
Subsequently, the assessee’s case was selected for scrutiny under section 143(2) of the Act, and a show-cause in respect of the rejection of claim of deduction, under section 10AA of the Act, was issued during the assessment proceeding.
The total turnover for the year under consideration being shown at Rs. 239, 83, 80,927/- and Net Profit (NP), at Rs. 13, 13, 66,314/- (GP @ 5.47%), the entire NP was claimed to be exempted under section 10AA of the Act.
And the assesse achieving aturnover of Rs. 92,33,44,065/- and NP at Rs. 10,13,80,418/- (GP @ 11% and NP @ 10.89%), in the immediately preceding year which was the first year of business,the assesse has now preffered an appeal before ITAT against the order of Ld. CIT (A).
The question involved in the appeal being as to whether the income from trading activity in SEZ –Zone tantamount to service for the purposes of sec10AA, the Tribunal observed as follows:
“The assessee was granted a letter of approval (LOA) by the Development Commissioner, Surat w.r.t. section 15(9) of the SEZ Act, 2005, to set up a unit for undertaking the authorized operations of manufacturing and trading of the Diamonds and Jewellery as mentioned in the LOA which is not in dispute. As per the provisions of section 10AA of the I.T. Act, 1961 a unit established in SEZ is entitled to get an exemption of its income from manufacturing and services i.e. trading activities.”
“In view of the provisions of section 10AA, it is evident that not only profits and gains of manufactured goods but also trading of goods are allowed for getting the exemption us 10AA of the I.T. Act, 1961 if imported goods are re-exported by a unit duly approved by development commissioner of concerned SEZ.”, the Bench added.
Thus, allowing the Revenue’s appeal, it ruled:
“In view of the above, we are of the considered view that trading activity carried out by the assessee is entitled for deduction benefit u/s 10AA”
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