The DCIT, Circle-1(1)(1), Ahmedabad V. Adani Bunkaering Pvt. Ltd., Ahmedabad

ITA 2348/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6962 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 03-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Competent authority
• Section: 143(3); 10AA; 143(1); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT) BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 2348/AHD/2018 (ASSESSMENT YEAR: 2012-13) DCIT, CIR-1(1)(1), AHMEDABAD VS. M/S. ADANI BUNKERING PVT. LTD. ADANI HOUSE, NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD- 380009 PAN NO. AAD CC3 765 G ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI O. P. SHARMA, CIT DR RESPONDENT BY : SHRI VARTIK CHOKSHI , AR DATE OF HEARING 15.07.2020 DATE OF PRONOUNCEMENT 09.09.2020 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.09.2018 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) 1, AHMEDABAD ARISING OUT OF THE ORDER DATED 31.03.2016 PASSED BY THE DCIT, CIRCLE-1(1)(1), AHMEDABAD UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) FOR ASS ESSMENT YEAR 2012-13. 2. THE ASSESSEE COMPANY HAVING BUSINESS DEALING IN FUEL OLD AND HIGH SPEED DIESEL, ALSO SETTING UP AND OPERATING FACILIT IES IN CONNECTION WITH PLANTING, STORAGE, DELIVERY AND OTHER LOGISTIC OPER ATIONS FOR BUNKERING BUSINESS, REGISTERED AS A SPECIAL ECONOMIC ZONE (IN SHORT SEZ) UNIT WITH ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 2 - ADANI PORT AND SPECIAL ECONOMIC ZONE LTD. FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ELECTRONICALLY ON 30.11.2012 DECLARING A TOTAL INCOME OF RS. 10,51,79,840/- AFTER CLAIMING DEDUCTION OF RS. 42,4 1,29,196/- UNDER SECTION 10AA OF THE ACT WHICH WAS DULY PROCESSED UNDER SECT ION 143(1) OF THE ACT. ULTIMATELY THE ASSESSMENT WAS FINALIZED UNDER SECTI ON 143(3) OF THE ACT INTER ALIA DISALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 1 0AA TO THE TUNE OF RS. 42,41,29,196/- AND ADDED BACK TO THE TO TAL INCOME OF THE ASSESSEE. THE ASSESSEE HAS NOT MANUFACTURED AND/OR PRODUCED ARTICLES OR THINGS OR PROVIDED ANY SERVICES DURING THE PREVIOUS YEAR TO A.Y. 2012-13 FROM ITS SEZ UNIT AS OF THE OBSERVATION MADE BY THE LD. AO AND SUCH CLAIM WAS DISALLOWED. IN APPEAL THE SAME WAS DELET ED BY THE LD. CIT(A) RELYING UPON THE ORDER PASSED BY HIS PREDECESSOR IN ASSESSEES OWN CASE ON IDENTICAL ISSUE FOR A.YS. 2010-11 AND 2011-12 HOLDI NG THAT THE ASSESSEE IS CARRYING OUT THE MANUFACTURING ACTIVITIES AND HENCE IS ENTITLED TO THE CLAIM MADE UNDER SECTION 10AA OF THE ACT WITHIN THE MEANI NG OF THE PROVISION UNDER SECTION 2(R) OF THE SEZ ACT, 2005. 3. AT THE TIME OF HEARING OF THE INSTANT APPEAL THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSES SEES CASE IS COVERED ON IDENTICAL ISSUE BY AND UNDER THE ORDER PASSED BY TH E CO-ORDINATE BENCH IN ITA NO. 1555/AHD/2016 WITH C.O. 112/AHD/2016 FOR A. Y. 2010-11 AND IT(TP)A NO. 1102/AHD/2017 WITH C.O. 25/AHD/2018 FOR A.Y. 2011-12; A COPY WHEREOF HAS ALSO BEEN SUBMITTED BEFORE US. MR. SHARMA, THE LD. DR, WITH ALL HIS FAIRNESS HAS NOT RAISED ANY SERIOUS OBJECTION TO THAT OF THE ADMITTED FACTS AS SUBMITTED BY THE LD. AR. ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 3 - 4. WE HAVE HEARD THE RESPECTIVE PARTIES, WE HAVE AL SO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD INCLUDING TH E ORDER PASSED BY THE HO'BLE CO-ORDINATE BENCH IN REVENUES APPEAL ON TH E IDENTICAL ISSUE. THE RELEVANT PORTION THEREOF IS AS FOLLOWS:- 8.1 FROM THE ABOVE EXPLANATION, IT IS REVEALED THA T THE MEANING OF MANUFACTURING SHALL REMAIN THE SAME FOR THE PURPOSE OF CLAIMING THE DEDUCTION UNDER SECTION 10AA OF THE ACT AS ASSIGNED IN CLAUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 19 ; WHICH READS AS UNDER: MANUFACTURING MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A N EW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUD E PROCESSES SUCH AS REFRIGENRATION, CUTTING, POLISHING, BLENDING, REPAI R, REMARKING, RE- ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING; (EMPHASIS SUPPLIED) 8.2 FROM THE ABOVE DEFINITION, IT EMERGES THAT THE ACTIVITY OF BLENDING IS COVERED WITHIN THE MEANING OF MANUFACTURING AS PROV IDED UNDER THE SPECIAL ECONOMIC ZONE ACT 2005. NOW THE QUESTION ARISES WHE THER THE ACTIVITIES CARRIED OUT BY THE ASSESSEE AMOUNTS TO THE BLENDING AS CLAI MED BY THE ASSESSEE. IN THIS CONNECTION WE NOTE THAT THE ASSESSEE HAS IMPORTED V ARIOUS FUEL OIL IN BULK WHICH WERE BLENDED IN THE TANKS HIRED BY IT AT MUNDRA POR T AS EVIDENT FROM THE SUBMISSION OF THE ASSESSEE BEFORE THE AO. THE RELEV ANT EXTRACT OF THE SUBMISSION OF THE ASSESSEE IS REPRODUCED AS UNDER: THE ASSESSEE COMPANY HAS MADE IMPORT OF VARIOUS FUE L OIL IN BULK AND OUT OF SUCH IMPORTS FEW QUANTITY SHALL BE BLENDED AT MU NDRA PORT. THUS IT SHALL CARRY THE PROCESS OF BLENDING AT MUNDRA PORT. FURTHER AFTER BLENDING THE OIL/FUEL, THE SAME SHALL BE RE-EXPORTE D AS BUNKER FUEL SUPPLY TO FOREIGN RUN VESSELS DIFFERENT VESSELS AS PER THE IR REQUIREMENT, VARYING MAINLY IN TERMS OF VISCOSITY, SULFUR AND OTHER PARA METERS AT PORTS OF GUJARAT. THE ASSESSEE COMPANY HAS HIRED 7 TANKS OF DIFFERENT CAPACITY FOR FUEL OIL STORAGE FROM APSEZ THE BLENDING ACTIVITY TAKES PLACE AT THE TIME OF IM PORT OF CARGO/ NEW ARRIVAL. THE PRODUCT BEING IMPORTED HAVE THE SPECIF ICATION OF I.G. 'B' GRADE. ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 4 - THE PRODUCT OF B GRADE IS RECEIVED IN TANK WHICH AL READY HAVE THE PRODUCT OF A GRADE, HENCE THE SPECS OF IMPORTED CAR GO IS CHANGED TO C GRADE, WHEN IT IS BLENDED WITH A GRADE CARGO ALREAD Y IN THE TANK. AT THE TIME OF IMPORT THERE REMAINS SOME PRODUCT IN THE TANKS WHICH HAVE SPECIFICATION OF I.G. 'A' GRADE THE BLENDING ACTIVITY TAKES PLACE ALSO WHEN THE PRO DUCT OF DIFFERENT GRADES LYING IN VARIOUS TANKS IS MIXED AND A PRODUC T OF A NEW GRADE COMES INTO EXISTENCE. AS AN OPERATIONAL REQUIREMENT OR SPECIFIC ORDER FOR SUPPLY THE ASSESSEE COMPANY NEEDS TO CARRY OUT INTE R-TANK TRANSFERS. IN THIS ACTIVITY THE SPECS OF TWO DIFFERENT GRADE PROD UCTS ARE BLENDED AND THE SPECS OF THE MIXED PRODUCT EMERGE DIFFERENT FROM TH E SPECS OF CARGO TRANSFERRED. DURING THE PROCESS OF INTER-TANK TRANS FER CIRCULATION, CHURNING, HEATING ACTIVITY ALSO CARRIED OUT TO HAVE PROPER BLENDING AND HOMOGENEOUS PRODUCT AT ALL THE LEVELS IN THE TANK. THERE ARE SPECIFIC EQUIPMENT LIKE CHURNERS, JET PUM PS, HOT WATER LINES, BOILERS ETC. ARE INSTALLED IN THE TANKS FOR PROPER BLENDING. -(SPECIFIC COST TO HAVE MANUFACTURING-FACILITY).TANKS ARE INSULATED TO MAINTAIN TEMPERATURE. SPECIFIC IT SYSTEMS ARE INSTALLED AT STORAGE TERMINAL TO HAVE BETTER CONTROL OVER TEMPERATURE, DIP MEASUREMENT, LEVEL OF CARGO. THE ABOVE SUBMISSION OF THE ASSESSEE HAS NOT BEEN D OUBTED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE AO DOUBTED ON THE MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE MAINLY FOR 2 REASONS, F IRSTLY, THAT THERE WAS NOT SUFFICIENT EQUIPMENT AVAILABLE WITH THE ASSESSEE SE CONDLY, AND THE AO REFERRED THE DEFINITION OF MANUFACTURE AS PROVIDED UNDER SEC TION 2(29B) OF THE ACT. 8.3 REGARDING THE AVAILABILITY OF EQUIPMENT, WE NOT E THAT THE ASSESSEE HIRED THE TANKS WHICH WERE WELL EQUIPPED FOR CARRYING OUT THE BLENDING ACTIVITIES AS DESCRIBED ABOVE. FURTHERMORE, THE ACTIVITY OF BLEND ING CANNOT BE LINKED WITH THE VALUE OF THE EQUIPMENT SHOWN BY THE ASSESSEE IN THE FINANCIAL STATEMENTS. 8.4 WE ALSO NOTE THAT THE DEFINITION OF THE MANUFAC TURING UNDER SECTION 10AA OF THE ACT HAS ALREADY BEEN PROVIDED FOR THE ASSESS EES CLAIMING THE BENEFIT THEREIN. THUS THERE WAS NO NEED TO IMPORT THE DEFIN ITION PROVIDED UNDER SECTION 2(29B) OF THE ACT WHILE EVALUATING THE FACT WHETHER THE ASSESSEE IS CARRYING OUT ANY MANUFACTURING ACTIVITY. IN OUR CONSIDERED VIEW, THE ASSESSEE IN THE PRESENT FACTS AND CIRCUMSTANCES IS CARRYING OUT BLENDING AC TIVITY WHICH IS MANUFACTURE WITHIN THE MEANING AS PROVIDED UNDER SEZ ACT. ACCOR DINGLY, WE HOLD THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING ACTIVITY. 8.4 IT IS ALSO PERTINENT TO TAKE A NOTE OF THE FACT THAT THE DEDUCTION UNDER SECTION 10AA IS ALSO AVAILABLE TO THE ASSESSEE ENGA GED IN PROVIDING ANY SERVICES. ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 5 - AS SUCH WE ARE INCLINED TO ELABORATE THE SERVICES E LIGIBLE FOR DEDUCTION UNDER SECTION 10AA OF THE ACT. 8.5 THE WORD SERVICE HAS NOT BEEN DEFINED UNDER THE ACT, THEREFORE IT IS IMPERATIVE TO REFER THE DEFINITION OF THE SERVICES PROVIDED UNDER THE SEZ ACT I.E. 2(Z) OF THE ACT WHICH READS AS UNDER: (Z) SERVICES MEANS SUCH TRADABLE SERVICES WHICH (I) ARE COVERED UNDER THE GENERAL AGREEMENT ON TRAD E IN SERVICES ANNEXED AS IB TO THE AGREEMENT ESTABLISHIN G THE WORLD TRADE ORGANISATION CONCLUDED AT MARRAKESH ON THE 15 TH DAY OF APRIL, 1994. (II) MAY BE PRESCRIBED BY THE CENTRAL GOVERNMENT FO R THE PURPOSES OF THIS ACT AND (III) EARN FOREIGN EXCHANGE; 8.6 FURTHER, THE RULE 76 OF SPECIAL ECONOMIC ZONE R ULES 2006 DEFINES THE SERVICES FOR THE PURPOSE OF THIS SECTION 2(Z) OF TH E SEZ ACT WHICH READS AS UNDER: 76. THE SERVICES FOR THE PURPOSES OF [1] [CLAUSE] (Z) OF SECTION 2 SHALL BE THE FOLLOWING, NAMELY:- TRADING, WAREHOUSING, RE SEARCH AND DEVELOPMENT SERVICES, COMPUTER SOFTWARE SERVICES, I NCLUDING INFORMATION ENABLED SERVICES SUCH AS BACK-OFFICE OPERATIONS, CA LL CENTRES, CONTENT DEVELOPMENT OR ANIMATION, DATA PROCESSING, ENGINEER ING AND DESIGN, GRAPHIC INFORMATION SYSTEM SERVICES, HUMAN RESOURCE S SERVICES, INSURANCE CLAIM PROCESSING, LEGAL DATA BASES, MEDIC AL TRANSCRIPTION, PAYROLL, REMOTE MAINTENANCE, REVENUE ACCOUNTING, SU PPORT CENTRES AND WEB-SITE SERVICES, OFF-SHORE BANKING SERVICES, PROF ESSIONAL SERVICES (EXCLUDING LEGAL SERVICES AND ACCOUNTING) RENTAL/LE ASING SERVICES WITHOUT OPERATORS, OTHER BUSINESS SERVICES, COURIER SERVICE S, AUDIO-VISUAL SERVICES, CONSTRUCTION AND RELATED SERVICES, DISTRI BUTION 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, SERVICE S AUXILIARY TO ALL MODES OF TRANSPORT, PIPELINES TRANSPORT. [EXPLANATION- THE EXPRESSION TRADING, FOR THE PU RPOSES OF THE SECOND SCHEDULE OF THE ACT, SHALL MEAN IMPORT FOR THE PURP OSES OF RE-EXPORT.] ON READING OF THE ABOVE RULE, IT IS TRANSPIRED THAT EVEN THE TRADING ACTIVITY CARRIED OUT BY THE ASSESSEE FROM ITS SEZ UNIT, THE PROFIT FROM SUCH ACTIVITY IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 10AA OF THE AC T. 8.7 NOW THE NEXT QUESTION ARISES WHETHER THE PROVIS IONS OF INCOME TAX ACT 1961 WILL PREVAIL OVER THE PROVISIONS OF THE SPECIA L ECONOMIC ZONES ACT, 2005. ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 6 - AT THIS POINT IT IS RELEVANT TO REFER THE RELEVANT PROVISIONS OF SECTION 51 OF SEZ ACT 2005 WHICH IS GIVEN BELOW:- 51.(1) THE PROVISIONS OF THIS ACT SHALL HAVE ACT T O HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT OVERRIDING EF FECT, THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FO RCE OR IN ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. 8.8 FROM THE READING OF THE PROVISIONS IT IS CLEAR THAT THE PROVISIONS AS SPECIFIED UNDER THE SPECIAL ECONOMIC ZONES ACT, 200 5 WOULD HAVE OVERRIDING EFFECT ON THE INCOME TAX ACT. THE SAME VIEW HAS ALS O BEEN HELD IN THE CASE OF THE MIDAS DFS (P) LTD. BY THE HONBLE KOLKATA ITAT IN ITA NO.30/KOL/2012 FOR THE AY 2008-09 VIDE ORDER DATED 13/11/2013. THE RELEVAN T EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST OBJECTION OF THE ASSE SSING OFFICER WAS THAT THE BENEFIT OF SECTION 10AA OF THE ACT IS LOST WHEN THE ASSESSEE IS ENGAGED SOLELY IN TRADING ACTIVITIES. IT HAS BEEN NOTICED ABOVE THAT SECTIO N 10AA(1) ALLOWS BENEFITS, INTER ALIA, FOR THE PROVIS IONS OF ANY SERVICES BY AN ELIGIBLE ENTERPRISE. OBVIOUSLY, THE ERSTWHILE PA RTNERSHIP FIRM I.E., M/S MIDAS INTERNATIONAL WAS PERMITTED TO DO TRADING BY THE COMPETENT AUTHORITY. THE FIRM GOT CONVERTED INTO ASSESSEE COM PANY AND CONTINUED THE SAME BUSINESS WITH THE PRIOR PERMISSION FROM TH E COMPETENT AUTHORITY UNDER THE SEZ ACT. THE DEFINITION OF SERVICE IN T HE SEZ ACT INCLUDES TRADING ACTIVITY. IN THAT VIEW OF THE MATTER, IT BECOMES MANIFEST THAT THE TRADING ACTIVITY HAS BEEN PERMITTED BY THE COMPETEN T AUTHORITY UNDER THE SEZ ACT. AS SUCH, THERE CAN BE NO QUESTION OF DENIA L OF EXCEPTION US/S 10AA OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE H AS PLACED ON RECORD A COPY OF AN ORDER PASSED BY THE JAIPUR BENCH IN DCIT VS. GOENKA DIAMOND & JEWELLERS LTD. IT APPEAL NO. 509(JP) OF 2 011 2012(050)- SOT-0307-TJAI IN WHICH IT HAS BEEN HELD THAT TRADIN G OF THE ELIGIBLE GOODS ENTITLES THE SE TO THE BENEFIT OF SECTION 10A A OF THE ACT. SIMILARLY, THE COPY OF ANOTHER ORDER PASSED BY MUMBAI BENCH IN M/S GITANJALI EXPORTS CORPORATION LIMITED VS. ADCIT IN ITA NO. 6947 & 6948/MUM/2011 DATED 08-05-2013 HAS ALSO BEEN PLACED ON RECORD IN WHICH THE VIEW EXPRESSED BY THE JAIPUR BENCH HAS BE EN REITERATED. NO CONTRARY PRECEDENT HAS BEEN BROUGHT TO OUR NOTICE B Y THE LD. DR. IN VIEW OF THE TWO TRIBUNALS ORDERS AVAILABLE ON THE POINT ALLOWING EXEMPTION U/S. 10AA OF THE ACT IN RESPECT TO TRADING ACTIVITIES, WE ARE OF THE CONSIDERED OPINION THAT NO EXCEPTION CAN BE TAKEN T O THE VIEW EXPRESSED BY THE LD. CIT(A) IN GRANTING THE EXEMPTION. 8.9 IN THIS RESPECT WE ALSO DRAW SUPPORT AND GUIDAN CE FROM DECISION OF HONBLE ITAT JIAPUR B BENCH IN CASE OF DCIT VS. G OENKA DIAMOND & ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 7 - JEWELLERS LTD. REPRTED IN 19 TAXAMMAN.COM 91. THE R ELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- IT IS TRUE THAT THE WORD 'SERVICES' IS NOT MENTIONE D EITHER IN SECTION 10AA OR IN SECTION 2 OF THE INCOME TAX ACT WHICH CONTAIN S THE DEFINITION OF VARIOUS WORDS. DEDUCTION UNDER SECTION 10AA IS AVAI LABLE IN CASE THE UNIT BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLE OR THINGS OR PROVIDE SERVICES. IT IS NOT DISPUTED THAT THE UNIT OF THE A SSESSEE HAS DONE TRADING ACTIVITY BY IMPORTING THE ITEMS AND THEREAFTER SELL ING THEM. HOWEVER, IT IS DISPUTED BY THE REVENUE THAT THE ASSESSEE HAS DONE ONLY TRADING AND NO VALUE ADDITION HAS BEEN MADE. [PARA 2.10] THE EXPLANATION 1 TO SECTION 10AA CONTAINS THE DEFI NITION OF THE WORD 'EXPORT TURNOVER', EXPORT IN RELATION TO SPECIAL EC ONOMIC ZONE, MANUFACTURE RELEVANT TO SECTION 10AA SPECIAL ECONOM IC ZONE AND UNIT. THE WORD MANUFACTURE IS TO BE CONSIDERED TO HAVE TH E SAME MEANING AS ASSIGNED IN CLAUSE (R) OF SECTION 2 OF SEZ ACT, 200 5. SIMILARLY, SEZ UNIT WILL HAVE THE SAME MEANING AS ASSIGNED TO THEM UNDE R CLAUSE (ZA ) OF SECTION 2 OF SEZ ACT. [PARA 2.11] IT IS NOTED THAT SECTION 10AA WAS NOT INSERTED BY T HE FINANCE BILL. SECTION 10AA WAS INSERTED BY THE SEZ ACT, 2005 WITH EFFECT FROM 10-2-2006. SECTION 27 OF SEZ ACT SAYS THAT PROVISION OF INCOME -TAX ACT SHALL APPLY TO, OR IN RELATION TO, THE DEVELOPER OR ENTREPRENEU R FOR CARRYING ON THE AUTHORIZED OPERATIONS IN A SPECIAL ECONOMIC ZONE OR UNIT SUBJECT TO THE MODIFICATIONS SPECIFIED IN THE SECOND SCHEDULE. THU S, IF THE OPERATIONS ARE AUTHORIZED THEN THE PROVISION OF THE INCOME-TAX ACT SHALL BE SUBJECT TO MODIFICATIONS OF SEZ ACT. THE SEZ ACT PROVIDES THAT SERVICES MAY BE PRESCRIBED BY THE CENTRAL GOVERNMENT FOR THE PURPOS E OF SEZ ACT AND SERVICES HAVE BEEN PRESCRIBED IN RULE 76 OF SEZ RUL ES. AS PER INSTRUCTION NO. 1/2006, DATED 24-3-2006 ISSUED ON THE BASIS OF BOARD OF APPROVAL MEETING HELD ON 17-3-2006 ON THE ISSUE OF SETTING U P TRADING UNITS IN THE SPECIAL ECONOMIC ZONE IT WAS STATED THAT RULE 76 OF SEZ RULES WOULD BE CONFINED TO IMPORT OF GOODS FOR EXPORT. SUCH INSTRU CTION WAS MODIFIED VIDE INSTRUCTION NO. 4/2006, DATED 24-5-20 06. [PARA 2.16] IN THE SAID INSTRUCTION, A REFERENCE HAS BEEN MADE TO SECTION 10AA. IT IS MADE CLEAR TO THE ENTREPRENEUR HAVING UNITS IN SEZ THAT BENEFIT UNDER SECTION 10AA WILL EXCLUDE OTHER TRADING EXCEPT IN T HE NATURE OF RE-EXPORT OF IMPORTED GOODS. THUS, THERE IS A PROMISSORY ESTO PPEL BY THE GOVERNMENT TO THE ENTREPRENEUR PUTTING UP THE UNITS IN THE SEZ THAT BENEFIT UNDER SECTION 10AA WILL BE AVAILABLE ON TRA DING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. [PARA 2.17] VIDE INSTRUCTION NO. 1/2006, DATED 24-3-2006 OF MIN ISTRY OF COMMERCE, IT WAS CLARIFIED THAT TRADING UNITS CAN BE SET UP IN T HE SEZ. FURTHER, MODIFICATION WAS MADE ON 24-5-2006 IN WHICH IT WAS MADE CLEAR THAT THE ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 8 - DEDUCTION UNDER SECTION 10AA WILL BE AVAILABLE IN R ESPECT OF THE TRADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. THUS THE ASSESSEES WERE PROMISED THAT THEY WILL BE ELIGIBLE FOR DEDUCTION U NDER SECTION 10AA IN RESPECT OF THE PROFIT EARNING ON TRADING OF RE-EXPO RT OF IMPORTED GOODS. THE REVENUE HAD NOT BEEN ABLE TO SHOW US THAT SUCH INSTRUCTION WAS NOT WITHDRAWN OR THE BOARD HAS ISSUED INSTRUCTION THAT INSTRUCTION DATED 24- 5-2006 FROM THE MINISTRY OF COMMERCE WILL NOT BE AP PLICABLE FOR THE PURPOSE OF ALLOWING EXEMPTION UNDER SECTION 10AA. H ENCE, IN VIEW OF THE DOCTRINE OF PROMISSORY ESTOPPEL, THE ASSESSEE IS EN TITLED TO DEDUCTION. [PARA 2.19] SECTION 51 OF THE SEZ ACT MENTIONS THAT NOTWITHSTAN DING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW F OR THE TIME BEING IN FORCE OR IN ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT, THE PROVISION OF SEZ ACT WILL PREVAIL. TH US ONE WILL HAVE TO CONSIDER THE IMPLICATION OF SECTION 51 OF THE SEZ A CT. IT MEANS THAT ANYTHING INCONSISTENT TO THE PROVISION OF THE SEZ A CT WILL NOT BE CONSIDERED. THUS, THE WORD 'SERVICES' AS MENTIONED IN SECTION 10AA CANNOT BE CONSTRUED IN CONSISTENTLY WITH THE DEFINI TION OF SERVICES GIVEN IN THE SEZ ACT. UNDER THE SEZ ACT, THE TRADING IS INCL UDED IN THE SERVICES PROVIDED THE TRADING IN EXPORT OF IMPORTED GOODS. T HEREFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 10AA AND THE REFORE, THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN ALLOWING TH E EXEMPTION. [PARA 2.20] THUS FROM THE ABOVE, IT IS CLEAR THAT THE TRADING A CTIVITY CARRIED OUT BY THE ASSESSEE IS ALSO ELIGIBLE FOR EXEMPTION UNDER SECTI ON 10AA OF THE ACT WITHIN THE MEANING OF THE PROVISIONS PROVIDED UNDER SECTION 2( Z) OF THE SEZ ACT READ WITH THE RULE 76 OF SPECIAL ECONOMIC ZONE RULES 2006 AS DISCUSSED ABOVE. 8.10 NOW COMING TO THE ASPECT WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION WITH RESPECT TO THE INCOME GENERATED BY IT ON ACCOU NT OF CURRENCY FLUCTUATION, INTEREST INCOME, IN THIS REGARD WE NOTE THAT THESE INCOMES ARE ARISING IN THE COURSE OF THE BUSINESS (IMPORT AND EXPORT) CARRIED ON BY THE ASSESSEE IN ITS SEZ UNIT. AS SUCH THESE INCOMES ARE INTRINSICALLY LINKE D WITH THE OPERATION OF THE ASSESSEE. ACCORDINGLY WE HOLD THAT SUCH INCOME IS E LIGIBLE FOR DEDUCTION/EXEMPTION UNDER SECTION 10AA OF THE ACT. 8.11 WE ALSO NOTE THAT THE ASSESSEE HAS CORRECTLY C ALCULATED THE AMOUNT OF DEDUCTION IN PROPORTION TO THE EXPORT SALES VIZ A V IZ DOMESTIC SALES OF THE SEZ UNIT AS PROVIDED UNDER SUBSECTION 7 OF SECTION 10AA OF THE ACT. THUS THE AO ERRONEOUSLY HAS REDUCED THE AMOUNT OF DOMESTIC TURN OVER FROM THE TOTAL TURNOVER OF THE ASSESSEE SEZ UNIT WHICH RESULTED LOSS TO THE ASSESSEE. IN VIEW OF THE ABOVE, WEDO NOT FIND ANY REASON TO I NTERFERE IN THE ORDER OF THE LEARNED CIT (A). ACCORDINGLY, WE UPHOLD THE SAME. H ENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2348/AHD/2018 DCIT VS. M/S. ADANI BUNKERING PVT. LTD. ASST.YEAR 2012-13 - 9 - WE, THEREFORE, KEEPING IN VIEW THE RATIO LAID DOWN BY THE CO-ORDINATE BENCH ON THE SIMILAR SET OF FACTS AND LAW FIND NO I NFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE APPEAL PRE FERRED BY THE ASSESSEE BY DELETING THE ADDITION HOLDING IT ENTITLED TO THE CLAIM OF DEDUCTION /EXEMPTION UNDER SECTION 10AA OF THE ACT AND TO THE TUNE OF RS. 42,41,29,196/-/- SO AS TO WARRANT INTERFERENCE. H ENCE, IN ABSENCE OF ANY MERIT FOUND IN THE APPEAL PREFERRED BY THE REVENUE, WE DISMISS THE APPEAL. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09/09/2020 SD/- SD/- (AMRJIT SINGH) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/09/2020 TANMAY, SR. PS TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD