DCIT 15(1)(2), MUMBAI V. DUTYFREE DISTRIBUTION SERVICES P.LTD, NAVI MUMBAI

ITA 3307/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURSHOTTAM KUMAR
• Section: 143(3); 10AA

Judgement Text

THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ITA NO. 3307/MUM/2016 ( / ASSESSMENT YEAR:2011 - 12) THE DY. CIT 15(1)(1), MUMBAI ROOM NO. 517, 5 TH FLOOR, AAYKAR BHAWAN, MUMBAI. / VS. M/S DUTYFREE DISTRIBUTION SERVICES PVT. LTD; D - 73/ 1, TTC INDUSTRIAL AREA, MIDC, T U R BHE, NAVI MUMBAI 400 705. ./ ./ PAN NO. AACCD6134D ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SH. PURSHOTTAM KUMAR, D.R / RESPONDENT BY : SH. J.P BAIRAGRA, A.R / DATE OF HEARING : 20.12.2017 / DATE OF PRONOUNCEMENT : 20 .12.2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 24, MUMBAI, DATED 19.02.2016, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME - TAX ACT, 1961(FOR SHORT ACT), DATED 29.03.2014. THE REVENUE ASSAI LING THE THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 2 ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - I. ON THE FACTS AND CIRCUMSTA NCES OF THE CASES, THE LD. CIT(A) ER R ED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10AA OF THE I.T ACT IN RESPECT OF PROFITS OF SEZ UNIT AMOUNTING TO RS. 1,26,76,514/ - . II. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. III. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE ANT THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF GOODS IN THE NATURE OF ALCOHOLIC PRODUCTS, CIGARETTES, CONFECTIONERY, HIGH QUALITY WATCHES ETC. HAD FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 30 . 09 .20 11 , DECLARING NIL I NCOME . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND ITS I NCOME WAS ASSESSED ON 29.03.2014 UNDER SEC. 143(3) AT RS. 1,26,76,510 / - . 3 . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED A DEDUCTION UNDER SEC. 10AA OF RS. 1,26,76,514/ - IN RESPECT OF PROFITS OF SEZ UNIT IN COCHIN SPECIAL ECONOMIC ZONE (CSEZ), KAKKANAD, KOCHI. THAT ON BEING CALLED UPON BY THE A.O TO SHOW CAUSE AS TO WHY THE DEDUCTION UNDER SEC. 10AA MAY NOT BE ADDED BACK TO ITS TOTAL INCOME, THE ASSESSEE SUBMITTED THAT BY VIRTUE OF THE PROVISIO NS OF THE SPECIAL ECONOMIC ZONE, 2005, THE ACTIVITY OF IMPORTING OF GOODS AND ITS EXPORTS AMOUNTED TO PROVIDING OF SERVICES AS PER THE PROVISIONS OF SEC. 10AA OF THE ACT, AND AS THE WORD S ERVICE WAS NOT DEFINED UNDER SEC . 10AA OF THE ACT, THE DEFINITIO N OF SERVICE MUST BE TAKEN FROM THE SEZ ACT, 2005. HOWEVER, THE A.O NOT BEING PERSUADED TO SUBSCRIBE TO THE AFORESAID VIEW OF THE ASSESSEE CONCLUDED THAT THE LEGISLATURE HAD DELIBERATELY EXCLUDED THE DEFINITION OF SERVICES FROM SEZ ACT FROM ITS THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 3 SCOPE AND , THEREFORE, THE DEFINITION OF SERVICES COULD NOT BE TRANSPOSED FROM SEZ ACT. THE A.O IN THE BACKDROP OF HIS AFORESAID CONVICTION DISALLOWED THE CLAIM OF DEDUCTION UNDER SEC. 10AA OF RS. 1,26,76,514/ - A N D ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASS ESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) AFTER DELIBERATING ON THE CONTENTIONS OF THE ASSESSEE IN THE BACKDROP OF THE FACTS OF THE CASE, THEREIN OBSERVED THAT HIS PREDECESSOR, VIZ. CIT(A) - 22, MUMBA I, HAD GRANTED RELIEF TO THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION IN THE IMMEDIATELY PRECEDING ASS ESSMENT YEAR, VIZ. A.Y. 2010 - 11. THE CIT(A) BEING OF THE VIEW THAT THERE WAS NO CHANGE IN FACTS DURING THE YEAR UNDER CONSIDERATION, AS AGAINST THOSE INV OLVED IN THE IMMEDIATE PRECEDING YEAR, THEREFORE, FOLLOWED THE SAME AND HELD THAT THE CLAIM OF DEDUCTION OF RS. 1,26,76,514/ - RAISED BY THE ASSESSEE WAS WELL IN ORDER. 5. THE REVENUE BEING AGGRIEVED WITH T H E O RDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THE ORDER OF THE CIT(A) FOR A.Y. 2010 - 11 IN THE ASSESSES OWN CASE, WHICH WAS FOLLOWED FOR DECIDING THE APP EAL BY THE CIT(A) FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2011 - 12, HAD BEEN UPHELD BY THE ITAT, SMC BENCH, VIDE ITS ORDER DATED 13.07.2016 (C OPY PLACED ON RECORD) AND THE APPEAL OF THE REVENUE ASSAILING THE ALLOWING OF DEDUCTION U/S 10AA BY THE CIT(A), WAS DISMISSED. TH E LD. A.R SUBMITTED THAT AS THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE THE SAME AS AGAINST THE FACTS INVOLVED IN THE AFORESAID PRECEDING YEAR, VIZ. A.Y. 2010 - 11, THEREFORE, THE ISSUE INVOLVED IN T HE PRESENT APPEAL WAS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL. PER CONTRA, THE THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 4 LD. D.R DID NOT DISPUTE THE FACTUAL POSITION AS WAS SO AVERRED BY THE LD. A.R BEFORE US. 6. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, P ERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL IS SOUGHT FOR ADJUDICATING AS TO WHETHER THE CLAIM OF DEDUCTION RAISED BY THE ASSESSEE UNDER SEC. 10AA OF THE ACT IS IN ORDER , OR NOT. WE HAVE DELIBERATED ON THE ISSUE INVOLVED IN THE PRESENT CASE, AND IN THE BACKDROP OF THE SAME PERUSED THE ORDER OF THE ITAT, MUMBAI BENCH SMC PASSED IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2010 - 11. WE ARE PERSUAD ED TO BE IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R THAT THE ISSUE AND THE FACTS PERTAINING TO THE ENTITLEMENT OF THE ASSESSEE FOR CLAIM OF DEDUCTION UNDER SEC. 10AA FOR THE YEAR UNDER CONSIDERATION ARE IN PARITY WITH THOSE FOR THE AFORESAID PRECEDING YEAR, VIZ. A.Y. 20 10 - 1 1 . WE FIND THAT THE TRIBUNAL WHILE PASING ITS ORDER IN THE ASSESSES OWN CASE FOR A.Y. 2010 - 11, VIZ. ITO 15(1)(4) VS. DUTY FREE DISTRIBUTION SERVICES (P) LTD (2017) 83 TAXMANN.COM 64 (MUM) , HAD OBSERVED AS UNDER: 3. WE HAVE CONSI DERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FACTS IN BRIEF ARE THAT THE ASSESSEE, CLAIMED TO BE ENGAGED IN THE BUSINESS OF DUTY FREE IMPORT AND EXPORT OF GOODS, MAINLY SOLD AT DUTY FREE SHOPS IN INDIA AND ABROAD, MAINLY IN CIGARETTES AND FOREIGN MADE LIQUOR AND CLAIMED DEDUCTION AMOUNTING TO RS.48,78,973/ - UNDER SECTION 10AA OF THE ACT. DURING SCRUTINY PROCEEDINGS THE LEARNED ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH NECESSARY DETA ILS WHICH WERE FILED BY THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 13.10.2012 AND 09.03.2013 MADE SUBMISSIONS CLAIMING THAT THE ASSESSEE IS A TRADING CONCERN AND ENGAGED IN TRADING SERVICE OF IMPORT AND EXPORT OF FMFL AND CIGARETTES FROM THE SEZ AND THER EFORE ELIGIBLE FOR DEDUCTION UNDER SECTION 10AA. THE ASSESSEE PLACED RELIANCE ON SECTION 51(1) OF THE SEZ ACT READ WITH RULE 76 OF SEZ RULES, 2006, WHEREIN THE SERVICES HAS BEEN DEFINED TO INCLUDE TRADING. HOWEVER, THE LEARNED ASSESSING OFFICER DISALLOWE D THE CLAIMED DEDUCTION AND TAXED THE SAME UNDER THE NORMAL PROVISIONS OF THE ACT. THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 5 3.1 ON APPEAL BEFORE THE LEARNED CIT(A) THE FACTUAL MATRIX/ SUBMISSIONS AS MENTIONED IN PARA 3.2 OF THE IMPUGNED ORDER WERE CONSIDERED AND BY FOLLOWING VARIOUS DECISIONS INC LUDING HOTEL ASHOKA (ITDC) VS. ACIT (2012) STPL (WEB) 89 (SC), GITANJALI EXPORTS (ITA NO. 6947 & 6948/MUM/2011), GOENKA DIAMONDS AND JEWELLERS LTD. 146 TTJ 68 (JP), MIDAS DFS PVT. LTD. 37 CCH 264 (KOL.), DECIDED IN FAVOUR OF THE ASSESSEE. THE REVENUE IS AG GRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 3.2 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE CO UNSEL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THE CLAIMED DEDUCTION UNDER SECTION 10AA OF THE ACT WAS STARTED IN 2007 FOR WHICH APPROVAL WAS GRANTED BY CSEZ DEVELOPMENT COMMISSIONER, PERMITTING THE ASSESSEE TO ESTABLISH THE UNIT AT SEZ TO UNDERTAKE ITS TRADING ACTIVITY. THE ASSESSEE PURCHASES ITEM LIKE CIGARETTES AND FOREIGN LIQUOR, BESIDE OTHER FOREIGN SUPPLIERS, FROM FLAMINGO DFS PVT. LTD. AND FROM FLAMINGO DUTY FREE SHOP PVT. LTD. HAVING THEIR REGISTERED OFFICE AT NAVI MUMBAI. THESE TWO CONCERNS IMPORT THE ITEM FROM ABOARD AND FLAMINGO GOT THE LICENCE TO OPERATE DUTY FREE SHOPS AT VARIOUS AIR PORTS/SEA PORTS IN INDIA AND ALSO HAS BONDED WAREHOUSES IN DIFFERENT CITIES IN INDIA WHEREVER ITS DUTY FREE SHOPS. THE PURCHASES MADE BY THE ASSESSEE ARE BY WAY OF HIGH SEAS PURCHASES WHEREIN THE GOODS ARE SOLD BY FLAMINGO TO THE ASSESSEE, WHILE THE CARGO IS ON THE HIGH SEAS. THESE ARE DONE THROUGH HIGH SEAS SALES CONTRACT. THE NECESSARY DOCUMENTS WERE DULY EXAMINED BY THE LEARNED CIT(A) AND THIS FACTUAL MATRI X IS NOT CONTROVERTED BY THE REVENUE. ORIGINAL BILL OF LADING, BILL OF ENTRY WERE ALSO EXAMINED. THE PURCHASES WERE MADE ON THE HIGH SEAS AND NOT IN INDIA. THERE IS NOT A SINGLE INSTANCE WHERE THE LOCAL PURCHASES WERE MADE WITHIN IN INDIA. WE FIND THAT THE RATIO LAID DOWN IN THE CASES LIKE GITANJALI EXPORTS, MIDAS DFS PVT. LTD. AND GOENKA DIAMOND AND JEWELLERS LTD. (SUPRA), SUPPORT THE CASE OF THE ASSESSEE. THE ISSUE OF ALLOWABILITY WAS DULY CONSIDERED BY THE JAIPUR BENCH IN 146 TTJ 68 (SUPRA). THE TOTALITY OF FACTS/PROVISIONS OF SEZ ACT AND SEZ RULES PROVIDES THAT THE BENEFIT OF SECTION 10AA IS AVAILABLE ON TRADING. THE RATIO LAID DOWN IN GITANJALI EXPORTS CORPORATION AND GITANJALI GENTS LTD. ALSO SUPPORTS THE CASE OF THE ASSESSEE. THE RELEVANT FINDINGS HAV E BEEN REPRODUCED AT PAGE 6 ON WARDS OF THE IMPUGNED ORDER. CONSIDERING THE TOTALITY OF FACTS AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED CIT(A). WE FIND THAT THE FACTS AND THE ISSUE IN VOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION REMAIN THE SAME AS WERE THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 6 INVOLVED IN THE PRECEDING YEAR, VIZ. A.Y. 2010 - 11, THEREFORE, THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL. W E THUS IN THE BACKDROP OF THE AFORESAID FACTS UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 7. THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 .12.2017 SD/ - SD/ - ( RAJENDRA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 20 .12 .2017 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI THE DY. CIT VS. M/S DUTYFREE DISTRIBUTION SERVICES ITA NO. 3307/MUM/2016 7