M/S GOENKA JEWELLERS, Jaipur V. CIT, Jaipur

ITA 365/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99445 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DR DHK
• Assessee Lawyers: G G MUNDRA CA A
• Keywords: Opportunity of being heard; Competent authority
• Section: 143(3); 142(1); 10AA; 263; 63; 10

Judgement Text

ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 365/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 M/S. GOENKA JEWELLERS 401, PANCHRATNA, MSB KA RASTA,JAIPUR CUKE VS. THE CIT-1 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABFG 8810 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 384/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. GOENKA JEWELLERS 401, PANCHRATNA, MSB KA RASTA,JAIPUR CUKE VS. THE CIT-1 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABFG 8810 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.G. MUNDRA, CA A JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA , CIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV:- BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS OF THE LD. CIT-1, JAIPUR DATED 28 -03-2012 AND 25-03-2013 ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 2 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 U/S 2 63 OF THE ACT RESPECTIVELY. 2.1 THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE AS UNDER:- ITA NO. 365/JP/2012 A.Y. 2007-08 1. THAT THE INVOKING OF PROVISIONS OF SEC. 263 OF THE I. T. ACT, 1961 IN CASE OF THE APPELLANT BY THE LD. CIT WAS WI THOUT JURISDICTION, WRONG AND BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT IS WRONG, UNJUST AND HAS ERRED IN LAW IN HOLDIN G THAT THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER ON 10 .12.2009 U/S 143 (3) OF THE I. T. ACT, 1961 IN CASE OF THE APPELLANT WAS ERRONEOUS ON FACTS AND IN LAW AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE ASSESSING OFFICER HAS WRONGLY ALLOW ED DEDUCTION OF RS. 34954102/- CLAIMED BY THE APPELLANT U/S 10AA OF THE I. T. ACT, 1961 ALLEGING THE DEDUCTION CLAIMED BY THE ASSESSEE FIRM PERTAINS TO THE PROFITS DERIVED PURELY FROM TRADING ACTIVITY WHILE THE PROFITS DERIVED BY ASSESSEE FIRM WERE FROM THE EXPORT OF SE RVICES IN ACCORDANCE WITH SECTION 10AA OF I. T. ACT, 1961. ITA NO. 384/JP/2013 A.Y. 2008-09 1. THAT THE INVOKING OF PROVISIONS OF SEC. 263 OF THE I. T. ACT, 1961 IN CASE OF THE APPELLANT BY THE LD. CIT WAS WI THOUT JURISDICTION, WRONG AND BAD IN LAW. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT IS WRONG, UNJUST AND HAS ERRED IN LAW IN HOLDIN G THAT THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER ON 21 .12.2009 U/S 143 (3) OF THE I. T. ACT, 1961 IN CASE OF THE APPELLANT WAS ERRONEOUS ON FACTS AND IN LAW AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE ASSESSING OFFICER HAS WRONGLY ALLOW ED DEDUCTION OF RS.70751730/- CLAIMED BY THE APPELLANT U/S 10AA OF THE I. T. ACT, 1961 ALLEGING THE DEDUCTION CLAIMED BY THE ASSESSEE FIRM PERTAINS TO THE PROFITS DERIVED PURELY FROM TRADING ACTIVITY WHILE THE PROFITS DERIVED BY ASSESSEE FIRM WERE FROM THE EXPORT OF SE RVICES IN ACCORDANCE WITH SECTION 10AA OF I. T. ACT, 1961. ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 3 3.1 FIRST OF ALL, WE TAKE UP THE GROUND RAISED BY T HE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2007-08. BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007 -08 ON 29-10-2007 DECLARING INCOME OF RS. NIL. THE RETURN OF INCOME W AS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT. DURING THE YEAR, THE ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF PRECIOUS A ND SEMI PRECIOUS STONES, DIAMOND AND STUDDED GOLD JEWELLERY AND DECLARED THE INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. THE AO OBSERVED THAT THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATION SET UP AN UNDER TAKING IN SEZ, SURAT I.E. UNIT NO. 361, PLOT NO. 239, SURAT SPECIAL ECONOMIC ZONE, SACHIN TALUKA DISTT. SURAT (GUJARAT) AND COMMENCED BUSINESS AND M ADE EXPORTS THEREOF DURING THE YEAR. THE ASSESSEE CLAIMED DEDUCTION U/S 10AA AMOUNTING TO RS. 3,49,54,102/- BEING A 100% OF PROFITS DERIVED FROM THE EXPORTS AMOUNTING TO RS. 49,35,50,777/- MADE FROM THE SAID SEZ UNIT. THE ASSESSEE COMPANY INCURRED LOSS UNDER THE DTA UNIT AND CLAIMED EXEMPT ION 10AA AFTER SETTING IT OFF WITH THE LOSS OF THE DTA UNIT AND SUBSEQUENT LY, THE RETURNED INCOME OF THE ASSESSEE WAS ACCEPTED BY THE AO VIDE HIS ORDER U/S 143(3) OF THE ACT DATED 10-12-2009. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE AO ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 4 VIDE HIS LETTER NO. DCIT/CIR-2/2008-9/FIRM RAISED T HE FOLLOWING QUERY FROM THE ASSESSEE COMPANY U/S 142(1) OF THE ACT:- 15. GIVE A NOTE ON ADMISSIBILITY OF DEDUCTION U/S 10AA CLAIMED WITH SUPPORTING. IN RESPONSE TO QUERY RAISED BY THE AO, THE ASSESSEE FIRM SUBMITTED ITS REPLY AS UNDER ( AS PART OF PAPER BOOK) :- 1. THE ASSESSEE FIRM IS CONTINUOUSLY ENGAGED IN T HE BUSINESS OF TRADING AND MANUFACTURING OF PRECIOUS AND SEMI P RECIOUS STONES, DIAMOND & STUDDED GOLD JEWELLERY AND ALSO D EALING IN SHARES AND SECURITIES. DURING THE YEAR UNDER ASSESS MENT THE FIRM HAS ESTABLISHED AN UNIT IN SPECIAL ECONOMIC ZO NE, SURAT, GUJARAT. A COPY OF LETTER OF PERMISSION ISSUED BY T HE DEVELOPMENT COMMISSIONER, MINISTRY OF COMMERCE, GOV T.OF INDIA, SURAT SEZ,SACHIN, SURAT IS ENCLOSED. . 15. THE SECTION 10AA OF THE I.T. ACT, 1961 PROVIDE S FOR EXEMPTION TO NEWLY ESTABLISHED UNITS IN SPECIAL ECO NOMIC ZONES ON OR AFTER 01-04-205. THE PRIMARY CONDITIONS ARE A S FOLLOWS:- (A) ASSESSEE SHOULD BE ENTREPRENEUR (I.E. PERSON WH O HAS GRANTED APPROVAL BY DEVELOPMENT COMMISSIONER) A S PER SECTION 2(J) OF SEZ ACT, 2005 (B) UNITS SHOULD BEGIN TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR PROVIDE ANY SERVICES DURING T HE PREVIOUS RELEVANT TO ANY ASSESSMENT COMMENCING ON O R AFTER 01-04-2006 ( C) ASSESSEE SHOULD EXPORT HIS GOODS OR SERVICES BY ANY MODE PHYSICAL OR OTHERWISE. AS SUBMITTED ABOVE THE ASSESSEE FIRM IS AN APPROVED UNIT OF SEZ DULY AUTHORIZED BY THE COMPETENT AUTHORITY I.E. ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 5 DEVELOPMENT COMMISSIONER, MINISTRY OF COMMERCE, GOV T. OF INDIA, SURAT SEZ, SACHIN, SURAT. A COPY OF SAID APP ROVAL LETTER IS ENCLOSED AT POINT NO. 1 OF THIS LETTER. THE ASSE SSEE FIRMS ENTIRE PURCHASES ARE IMPORT. THE ENTIRE GOODS ARE E XPORTED TO FOREIGN COUNTRY. FURTHER THE ASSESSEE FIRM ALSO FU LFILLS ALL OTHER TERMS AND CONDITIONS LAID DOWN IN SECTION 10AA OF T HE I.T. ACT , 1961 AND AS SUCH DEDUCTION IS CLAIMED AS PER PROVIS IONS OF LAW. THE LD. AR OF THE ASSESSEE COMPANY SUBMITTED FORM N O. 65 (SEE RULE 16D) VIDE HIS LETTER DATED 30 TH OCT. 2007 INDICATING THEREIN AS UNDER ( AS PART OF PAPER BOOK):- 1. WE HAVE EXAMINED THE ACCOUNT AND RECORDS OF M/S. GOENKA JEWELLERS, M.S.B. KA RASTA, JAIPUR ( PAN AABFG 8810 D) RELATING TO THE BUSINESS OF THEIR UNDERTAKING NAMED M/S. GOENKA JEWELLERS (SEZ), ENGAGED IN TRADING / MANUFACTURING OF DIAMOND & DIAMOND STUDDED GOLD JEWELLERY DURING THE YEAR ENDE D ON THE 31 ST MARCH, 2007. 2. WE CERTIFY THAT THE UNDERTAKING IS LOCATED AT UNIT NO. 361, PLOT NO. 239, SURAT SPECIAL ECONOMIC ZONE,SACHIN TALUKA, DISTT. SURAT (GUJARAT), REGISTE RED UNDER SPECIAL ECONOMIC ZONE, SURAT AND THAT THE DEDUCTION TO BE CLAIMED BY THE ASSESSEE U/S 10AA OF THE I.T. ACT, 1961, IN RESPECT OF ASSESSMENT YEAR 2007 -08 IS RS. 3,49,54,102/- WHICH HAS BEEN DETERMINED ON THE BASIS OF DETAILS IN ANNEXURE TO THIS FORM. 3. WE CERTIFY THAT WE HAVE COLLECTED ALL THE RELEVANT INFORMATION NECESSARY FOR COMPUTING THE DEDUCTION ALLOWABLE UNDER THIS SECTION AND HAVE VER IFIED THE SAME WITH REFERENCE TO THE ACCOUNTS AND RECORDS OF THE ASSESSEE. 4. WE FURTHER REPORT:- ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 6 THE MANAGEMENT IS OF THE VIEW THAT THERE IS DRAFTING ANOMALY IN SECTION 10AA(7) OF THE I.T. ACT , 1961 AND IS OF THE FURTHER VIEW THAT THE INTENTIO N OF THE LEGISLATURE IS THAT WHOLE OF THE PART OF SEZ UNDERTAKING IS EXEMPT FROM TAX. IN VIEW OF THE SAME, TOTAL TURNOVER OF THE BUSINESS AND TOTAL PROFIT OF THE BUSINESS IS INTERPRETED AS TOTAL TURNOVER OF THE SEZ UNDERTAKING AND TOTAL PROFIT OF SEZ UNDERTAKING RESPECTIVELY AND ACCORDINGLY DEDUCTION U/S 10AA HAS BEEN CLAIMED BY THE ASSESSEE. 5. SUBJECT TO OUR OBSERVATION IN PARA 4 AND ABOVE, WE ARE OF THE OPINION AND TO THE BEST OF OUR KNOWLEDGE AND ACCORDING TO THE EXPLANATION GIVEN TO US, THE PARTICULARS GIVEN IN ANNEXURE A ARE TRUE AND CORRECT. 3.2 FURTHER THE REPLY OF THE ASSESSEE TO THE SUBSE QUENT QUERY RAISED BY THE DCIT , CIRCLE- 2, JAIPUR IS AS UNDER ( AS PART OF P APER BOOK):- WITH RESPECT TO FURTHER POINTS AT THE LAST HEARI NG THE CASE REGARDING AVAILABILITY OF EXEMPTION U/S 10AA O F THE I.T. ACT, 1961 FOR THE TRADING ACTIVITIES OF THE ASSESSE E FIRM SUBMITS AS UNDER:- 1. THE ASSESSEE FIRM HAS BEEN GRANTED A LETTER OF APPROVAL (LOA) BY THE DEVELOPMENT COMMISSIONER, SUR AT U/S 15(9) OF THE SEZ ACT , 2005 TO SET UP A UNIT FOR UN DERTAKING THE AUTHORIZED OPERATIONS OF MANUFACTURING AND TRADING OF THE DIAMOND AND JEWELLERY AS MENTIONED IN THE LOA. (PLE ASE REFER THE LOA DATED 10-02-2006 SUBMITTED ALONGWITH EARLIE R LETTER FILED WITH DEPARTMENT. 2. AS PER THE PROVISIONS OF SECTION 10AA OF THE I.T . ACT, 1961, A UNIT IS ENTITLED TO GET EXEMPTION FOR MANUFACTURING AND TRADING. THE RELEVANT PORTION OF SECTION 10AA I S REPRODUCED BELOW:- ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 7 10AA. (1)SUBJECT TO THE PROVISIONS OF THIS SECTION, IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, BEING AN ENTREPRENEUR AS REFERRED TO IN CLAUSE (J) OF SECTIO N 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 FROM HIS UNIT, WHO BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR PROVIDE ANY SERVICES DURING THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMEN T YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2006, A DEDUCTION OF (I) HUNDRED PER CENT OF PROFITS AND GAINS DERIVED F ROM THE EXPORT OF SUCH ARTICLES OR THINGS OR FROM SERVICES FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNIT BEGINS TO MANUFACTURE OR PRODUCE SUCH ARTICLES OR THINGS OR PROVIDE SERVICES AS THE CASE MAY BE, AND FIFTY P ER CENT OF SUCH PROFITS AND GAINS FOR FURTHER FIVE ASSESSMENT YEARS AND THEREAFTER: THE WORD SERVICES HAVE BEEN DEFINED IN SUB CLAUSE ( Z) OF SECTION 2 OF SEZ ACT, 2005. (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 MARRAKES ON T HE 15 TH DAY OF APRIL, 1994. (II) MAY BE PRESCRIBED BY THE CENTRAL GOVERNMENT FO R THE PURPOSE OF THIS ACT: AND (III) EARN FOREIGN EXCHANGE; THE CENTRAL GOVERNMENT HAS PRESCRIBED THE SERVICES IN THE RULE 76 OF THE SEZ RULES, 2006 WHICH INTER ALIA INC LUDES TRADING. THE EXTRACT OF THE RULE 76 IS REPRODUCED A S UNDER: TRADING , WAREHOUSING, RESEARCH AND DEVELOPMENT SERVICES, COMPUTER SOFTWARE SERVICES, INCLUDING INFORMATION E NABLED SERVICES SUCH AS BACK-OFFICE OPERATIONS, CALL CENTE RS, CONTENT DEVELOPMENT OR ANIMATION, DATA PROCESSINGS, ENGINEE RING AND DESIGN, GRAPHIC INFORMATION SYSTEM SERVICES, HUMAN ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 8 RESOURCES SERVICES, INSURANCE CLAIM PROCESSINGS, LE GAL DATA BASES, MEDICAL TRANSCRIPTION, PAYROLL, REMOTE MAINT ENANCE, REVENUE ACCOUNTING, SUPPORT CENTERS AND WEB-SITE SE RVICES, OFF-SHORE BANKING SERVICES, PROFESSIONAL SERVICES ( EXCLUDING LEGAL SERVICES AND ACCOUNTING) RENTAL/LEASING SERVI CES WITHOUT OPERATORS, OTHER BUSINESS SERVICES, COURIER SERVICE S, AUDIO- VISUAL SERVICES, CONSTRUCTION AND RELATED SERVICES, DISTRIBUTION SERVICES (EXCLUDING RETAIL SERVICES), EDUCATIONAL S ERVICES, ENVIRONMENTAL SERVICES, FINANCIAL SERVICES, HOSPITA L SERVICES, OTHER HUMAN HEALTH SERVICES, TOURISM AND TRAVEL REL ATED SERVICES, RECREATIONAL, CULTURAL AND SPORTING SERVI CES, ENTERTAINMENT SERVICES, TRANSPORT SERVICES, SERVICE S AUXILIARY TO ALL MODES OF TRANSPORT, PIPELINES TRANSPORT. THE MINISTRY OF COMMERCE,GOVT. OF INDIA HAS ISSUED A NOTIFICATION DATED 10-08-2006 WHICH INTER ALIA INTRODUCED AN EXPLANATION WHICH DEFINED THE WORD TRADING TRADING FOR THE PURPOSE OF THE SECOND SCHEDULE OF THE ACT, SHALL MEAN IMPORT FOR THE PURP OSE OF RE-EXPORT. SIMILARLY, THE MINISTRY OF COMMERCE, GOVT. OF INDIA HAS ALSO CLARIFIED VIDE INSTRUCTION NO. 4/2006 THAT THE TRADING ACTIVITIES WILL BE ALLOWED TO CARRY OUT ALL FORMS O F TRADING ACTIVITY BUT THE BENEFITS U/S 10AA WILL BE AVAILABL E TO TRADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOOD S. A COPY OF SAID INSTRUCTION ENCLOSED. THE SAID INSTRUC TION IS ALSO MADE AVAILABLE ON THE WEB SITE OF GOVT. OF IND IA WWW.SEZINDIA.GOV.IN THE ASSESSEE FIRM THUS FULFILLS ALL THE PRIMARY CON DITIONS OF SECTION 10AA FOR GETTING THE DEDUCTION I.E. THE ASSESSEE FIRM IS A ENTREPRENEUR (I.E. PERSON WH O HAS GRANTED APPROVAL BY DEVELOPMENT COMMISSIONER) AS PE R SEC. 2(J) OF SEZ ACT, 2005. (A) THE UNIT HAS PROVIDED SERVICES (TRADING I.E. IM PORT FOR THE PURPOSE OF RE-EXPORT ONLY) DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 9 (B) ASSESSEE FIRM HAS EXPORTED GOODS OR SERVICES BY FILING BILLS OF ENTRY/SHIPPING BILL IN PHYSICAL MODE. IN VIEW OF THE ABOVE, ` IF IMPORTED GOODS ARE EXPORTED BY A UNIT DULY APPROVED OF DEVELOPMENT COMMISSIONER OF CONCERNED SEZ. THE ASSESSEE FIRMS ENTIRE PURCHASES ARE IMPORT. THE ENTIRE GOODS ARE EXPORTED TO FOREIGN CO UNTRY. FURTHER THE ASSESSEE FIRM ALSO FULFILLS ALL OTHER T ERMS AND CONDITIONS LAID DOWN IN SECTION 10AA OF THE I.T. AC T, 1961AND AS SUCH DEDUCTION IS CLAIMED AS PER PROVISI ONS OF LAW AND ALLOWABLE AS SUCH.. 3.3 THE CASE OF THE ASSESSEE WAS TAKEN UP BY THE LD . CIT WHO PASSED THE ORDER U/S 263 OF THE ACT BY HOLDING THAT THE ASSES SEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 10AA OF THE ACT ON PURELY TRADING ACT IVITY. THE RELEVANT EXTRACT OF THE OBSERVATIONS OF THE LD. CIT IS AS U NDER:- 4. I HAVE CONSIDERED THE SUBMISSION PUT FORTH BY THE L D. A/R OF THE ASSESSEE AND FOUND THAT THERE ARE TWO ISSUES WHICH ARE TO BE DEA LT WITH. ONE IS REGARDING LEGALITY OF INVOKING OF PROVISION OF SECTION 263 AND THE OTH ER IS REGARDING APPLICABILITY OF DEFINITION OF WORD SERVICES DEFINED IN SEZ ACT TO IT ACT. BOTH THESE ISSUES ARE BEING DISCUSSED IN THE COMING PARAS. 4.1.2 THE DECISIONS RELIEVED UPON THE A/R DO NOT SU PPORT THE CASE OF THE ASSESSEE BECAUSE OF THE FOLLOWING REASONS: - A) THERE WAS EVERY MATERIAL IN THE HANDS OF REVERSIONA RY AUTHORITY BEFORE ISSUING SHOW CAUSE, AS EVIDENT FROM THE SHOW CAUSE NOTICE D ATED 20.07.2010. B) IN THE ASSTT. ORDER PASSED BY THE AO IT IS CLEAR TH AT AO HAS NOT GIVEN ANY FINDING ON THE ISSUES RAISED IN THE SHOW CAUSE NOTICE DATED 20 .07.2010. C) THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF REVENUE AS THE AO FAILED TO EXAMINE THE ISSUE AND S AME HAS RESULTED IN LOSS OF REVENUE. 4.2 AS REGARDS THE DEFINITION OF WORD SERVICES, THE SER VICES HAVE NOT BEEN DEFINED IN THE INCOME TAX ACT. THE DEFINITION OF SERVICE AS PROVID ED IN CLAUSE 2 (Z) OF SEZ ACT ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 10 CANNOT BE IMPORTED. ONLY THE DEFINITION OF MANUFACT URE GIVEN IN SECTION 2(Z) OF SEZ ACT WAS IMPORTED IN SECTION 10AA OF THE ACT. HENCE, THE DEFINITION OF SERVICES AS PROVIDED IN SEZ ACT CAN NOT BE APPLIED TO IT ACT. T HE RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS WHEREIN IT IS HELD THAT THE DEF INITION OF EXPRESSION IS ONE STATUTE CANNOT BE AUTOMATICALLY APPLIED TO ANOTHER STATUTE. 1. CIT VS. VASAN PUBLICATION (P) LTD. 159 ITR 381 (MAD ) 2. CIT VS. BUHARI SONS (P) LTD. 144 ITR 12 (MAD.) 3. LAXMANDA PRANCHAND & ORS VS. UNION OF INDIA & ORS 2 34 ITR 261 (M.P.) 4. CIT VS. R.J. TRIVEDI & SONS, 183 ITR 420 (MP) 4.2.2 A SERVICE IS AN INTERCONNECTION BETWEEN THE PROVIDE R AND THE CLIENT THAT CREATES AND CAPTURES VALUE. THE TRADING CANNOT BE CONSIDERED AS SERVICE. 4.2.3 THE ASSESSEE HAS EMPHASIZED THAT SECTION 10AA WAS I NSERTED IN THE I. T. ACT, 1961 BY THE SEZ ACT, 2005 AND NOT BY THE FINANCE ACT. THUS, ACCORDING TO ASSESSEE, 10AA ORIGINATES FROM THE SEZ ACT, AND HENCE IT WILL DETE RMINE PROVISION OF SECTION 10AA. FURTHER, IT IS ALSO MENTIONED THAT SECTION 51 OF TH E SEZ ACT, SAYS THAT IT WILL HAVE OVERRIDING EFFECT OVER THE OTHER LAWS. THEREFORE TH E DEFINITION OF SERVICE PROVIDING IN THE SEZ ACT SHOULD BE USED FOR THE PURPOSE OF SEC. 10AA. THESE ARGUMENTS OF ASSESSEE ARE COMPLETE MIS-CONSTR UCTION OF THE LEGAL POSITION. SEC 10AA WAS INTRODUCED IN THE IT ACT, BY SEZ ACT, 2005 ONLY AS A MATTER OF LEGISLATIVE CONVENIENCE. THIS DOES NOT MEAN THAT ONE CAN PROVID E FOR SOMETHING WHICH THE LEGISLATURE DID NOT WANT TO PROVIDE IN SEC. 10AA OF THE IT ACT. THE LEGISLATURE INTENDED ONLY TO USE THE DEFINITION OF MANUFACTURE FROM THE SEZ ACT AND NOT THE DEFINITION OF SERVICE. IF IT HAD INTENDED TO DO S O IT WOULD HAVE SAID SO FOR DEFINITION OF SERVICE ALSO AS IT DID FOR MANUFACTURE. SINC E SERVICE AS DEFINED IN SEZ ACT IS NOT TO BE USED FOR THE PURPOSE OF SECTION 10AA OF T HE IT ACT, THEREFORE THE DEFINITION OF SERVICE AS PER RULE 76 OF SEZ RULES 2006 CAN ALS O NOT BE USED FOR THE PURPOSE OF SECTION 10AA. IN THIS RESPECT THE FOLLOWING HEAD NOTE FROM THE DE CISION OF CIT V/S BUHARI SONS PVT. LTD. (MADRAS HIGH COURT) (1983) 144 ITR 12 IS REPRO DUCED BELOW, AND RELIED ON : IT IS WELL ESTABLISHED THAT IN THE ABSENCE OF ANY DEFINITION IN THE STATUTE, WORDS OCCURRING IN A STATUTE WILL HAVE TO BE UNDERSTOOD W ITH REFERENCE TO THE OBJECTS OF THE ACT AND IN THE CONTEXT IN WHICH THEY OCCUR. CONSEQU ENTLY, THE DEFINITIONS GIVEN FOR THE WORDS IN ONE STATUTE CANNOT AUTOMATICALLY BE IM PORTED FOR INTERPRETING THE SAME WORDS IN ANOTHER STATUTE. THE INTERPRETATION OF THE EXPRESSION MANUFACTURING PROCESS FOR PURPOSES OF THE FACTORIES ACT, 1948, W ILL NOT BE RELEVANT IN CONSTRUING THE SAME EXPRESSION FOR PURPOSES OF THE FINANCE ACT , 1966. THE PREPARATION OF EATABLES CANNOT BE TAKEN TO BE MANUFACTURE OF GOODS . THE WORDS GOODS USED IN S. 2 (7) (D) OF THE FINANCE ACT, 1966 HAS BEEN USED IN THE SENSE OF MERCHANDISE, I.E. ARTICLES GOODS WILL NOT INCLUDED EATABLES PREPARE D IN A HOTEL. FURTHER, THE EXPRESSION MANUFACTURE DOES NOT CONNOTE A TRADING ACTIVITY AND AN ACTIVITY ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 11 CARRIED ON IN A HOTEL CAN ONLY BE TAKEN TO BE TRADI NG ACTIVITY AND NOT A MANUFACTURING ACTIVITY. IN VIEW OF THIS CLEAR CUT DECISION THE DEFINITIONS OF SERVICE AS PER SEZ ACT 2005 CANNOT BE IMPORTED TO THE I. T. ACT, 1961. 4.2.4 IT IS WRONG TO PRESUME THAT SEZ ACT IS SUPREME FOR THE PURPOSE OF SECTION 10AA. IT MAY BE NOTED THAT SECTION 10AA (4) (WHICH LAYS DOWN THE ELIGIBILITY CRITERIA FOR THIS DEDUCTION) AS INTRODUCED BY THE SEZ ACT WAS SUBSTIT UTED BY THE FINANCE ACT, 2007 W.E.F. 10.02.2006, WHICH SHOWS THAT SECTION 10AA IS VERY MUCH GOVERNED BY THE FINANCE ACT AND I. T. ACT. 4.2.5 FURTHER, AS PER SEC. 51 OF THE SEZ ACT 2005, THE PR OVISIONS OF THIS ACT WILL HAVE OVERRIDING EFFECT OVER OTHER LAWS BUT IT WILL BE SO ONLY IN THE MATTERS RELATED TO IMPLEMENTATION OF THE SEZ ACT. IT CAN NOT HAVE OVER RIDING EFFECT ON THE PROVISIONS OF IT ACT, 1961 IN THE MANNER RELATED TO THIS ACT. THE SEZ ACT MADE PROVISIONS OF SEC. 10AA IN THE IT ACT AND DID NOT INCLUDE THE DEFINITI ON OF SERVICE AS PER ITS SECTION 2 (Z) IN THIS SECTION 10AA. IF NOW SEC, 51 OF SEZ ACT IS USED TO INSERT THIS DEFINITION IN THE IT ACT IT WILL BE VIOLATIVE OF THE SEZ ACT ITSELF. 4.2.6 IT MAY FURTHER BE NOTED THAT THIS MEANING TO THE E XPRESSION TRADING HAS BEEN GIVEN THROUGH THE RULES BUT IN THE MAIN SEZ ACT IN THE SE COND SCHEDULE THE TERMS SERVICES AND TRADING HAVE NOT BEEN INCLUDED UND ER DEFINITIONS OF SECTION 10AA OF THE IT ACT AT ALL. IT IS A WELL SETTLED PRINCIPLE O F LAW THAT SOMETHING WHICH IS NOT PROVIDED IN THE MAIN LEGISLATION (I.E. AND ACT) CAN NOT BE PROVIDED THROUGH A SUBORDINATE LEGISLATION (I.E. RULES). THUS WHEN THE DEFINITION OF SERVICE AS PROVIDED IN SEZ ACT IS NOT INCLUDED IN SECTION 10AA OF THE I T ACT THEN IT CANNOT BE APPLIED FOR THE PURPOSE OF THIS SECTION. 4.2.7 THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISI ON OF HON'BLE ITAT, JAIPUR BENCH IN THE CASE OF GOENKA DIAMOND & JEWELS LTD. (ITA NO . 509/P/11 ORDER DATED 31.01.2012) FOR A.Y. 2008-09. THOUGH THE DECISION O F HON'BLE ITAT IS BLINDING BUT SINCE THE ITAT IS NOT THE FINAL AUTHORITY TO DECIDE A LEGISLATIVE ISSUE. THEREFORE, THE DECISION OF HON'BLE ITAT IS YET TO ACHIEVE FINALITY . 4.3 THEREFORE, KEEPING IN VIEW THE ABOVE FACTS & DISCU SSION IT IS CLEAR THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 10AA OF THE I. T. ACT ON PURELY TRADING ACTIVITY. HENCE, THE MATTER IS REFERRED BACK TO THE FILE OF T HE AO FOR EXAMINING THE ISSUE AFRESH IN THE LIGHT OF ABOVE DISCUSSION AFTER OFFERING REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3.4 THE LD. AR RELIED ON THE ORDER OF THE AO WHILE THE LD. DR RELIED ON THE ORDER OF LD. CIT WHO PASSED THE ORDER U/S 263 O F THE ACT. ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 12 3.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ASSESSMENT ORDER AND THE LD. CITS ORDER U/S 263 OF THE ACT. ON PE RUSAL OF ORDER OF THE AO AS WELL AS SUBMISSION FILED BEFORE THE AO DURING TH E ASSESSMENT PROCEEDINGS, IT IS CLEAR THAT THE AO HAS RAISED A S PECIFIC QUERY IN RELATION TO DEDUCTION CLAIMED BY THE ASSESSEE U/S 10AA OF THE A CT. IN RESPONSE, THE ASSESSEE HAS FILED THE REPLY ALONGWITH REPORT U/S 1 0AA IN FORM NO. 56F. THEREAFTER, THE AO HAS RAISED FURTHER ENQUIRIES AND THE ASSESSEE FILED THE DETAILED REPLY WHICH IS MENTIONED HEREINABOVE. THER EFORE, IT IS CLEAR THAT SPECIFIC QUERY WAS RAISED BY THE AO AND ON PERUSAL OF THE DETAILS AND REPLY SUBMITTED BY THE ASSESSEE, THE AO ALLOWED DEDUCTION U/S 10AA OF THE ACT TO THE ASSESSEE. IN THIS REGARD, IT IS CLEARLY NOT A C ASE WHERE THERE IS LACK OF ENQUIRY BY THE AO. THE SECOND QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE ORDER PASSED BY THE AO IS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE OR NOT. IN THIS REGARD, WE HAVE GONE THROUGH THE ORDER OF LD. CIT. THE LD. CIT REFERRED TO THE CASE OF THE C OORDINATE BENCH IN HIS ORDER IN THE CASE OF M/S. GOENKA DIAMOND AND JEWELS LTD. FOR THE ASSESSMENT YEAR 2008-09 (ITA NO. 509/JP/2011 DATED 31-01-2012). THE LD. CIT IN HIS ORDER HAS ACKNOWLEDGED THE FACT THAT ON SIMILAR FACTS IN THE CASE OF ANOTHER ASSESSEE, THE COORDINATE BENCH OF ITAT HAS TAKEN A VIEW THAT DEDUCTION U/S 10AA IS AVAILABLE IN RESPECT OF TRAD ING ACTIVITY. AT THE SAME ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 13 TIME, THE LD. CIT HAD MENTIONED IN HIS ORDER THAT T HOUGH THE DECISION OF ITAT IS BINDING BUT SINCE THE ITAT IS NOT THE FINAL AUTHORITY TO DECIDE THE LEGISLATIVE ISSUE. THEREFORE, THE DECISION OF ITAT IS YET TO ACHIEVE FINALITY AND HENCE, HE DID NOT CONSIDER THE SAME. SO, IT IS CLEAR THAT COORDINATE BENCH HAS TAKEN A VIEW (THOUGH IN CASE OF ANOTHER A SSESSEE) ON SIMILAR FACTS THAT DEDUCTION U/S 10AA OF THE ACT IS AVAILABLE I N RESPECT OF TRADING ACTIVITY. IN THAT VIEW OF THE MATTER, THE VIEW TAKE N BY THE AO IS THEREFORE, IN LINE WITH THE VIEW TAKEN BY THE COORDINATE BENCH AN D IT IS A PLAUSIBLE VIEW. IT IS CLEARLY A CASE WHERE AO HAS TAKEN A POINT O F VIEW AND THE LD. CIT HAS TAKEN A DIFFERENT POINT OF VIEW. THUS IN THIS LIGH T OF THE MATTER, WE ARE OF THE CONSIDERED VIEW THAT THE VIEW TAKEN BY THE AO CANN OT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN THIS REGARD, THE DECISION OF HON'BLE APEX COURT IN THE CASE OF MALA BAR INDUSTRIAL LTD. VS. CIT (2000) 243 ITR 83 (SC) IS AN AUTHORITY ON THE S UBJECT. FURTHER REFERENCE IS DRAWN TO THE EXPLANATION U/S 263 OF THE ACT WHER EIN THE TERM RECORD HAS BEEN DEFINED WHICH MEANS RECORD SHALL INCLU DE AND SHALL ALWAYS BE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDINGS OF THIS ACT AT THE TIME OF EXAMINATION BY PRINCIPAL COMMISSIONER OR COMMISSION ER. IN THIS LIGHT OF THE MATTER, THE COORDINATE BENCH DECISION WAS VERY MUCH ON RECORD AND EVEN IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT AN D IN SPITE OF THAT, HE HELD A ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 14 DIFFERENT POINT OF VIEW. IT IS THUS CLEAR THAT VIEW IN THE MATTER OF DEDUCTION U/S 10AA TAKEN BY THE AO FIND FAVOURS WITH THE COOR DINATE BENCH. WE HAVE GONE THROUGH THE ORDER OF THE COORDINATE BENCH AND FIND THAT IT IS A WELL REASONED ORDER WHEREIN THE MATTER RELATING TO DEDUC TION U/S 10AA OF THE ACT IN RELATION TO TRADING ACTIVITY HAS BEEN EXAMINED I N DETAILED. SUBSEQUENTLY, THE SAID DECISION HAS BEEN FOLLOWED BY COORDINATE B ENCH IN CASE OF GITANJALI EXPORTS CORPORATION LTD. (ITA NO. 6947, 6948, 6949 & 6950/MUM/2011 DATED 8-05-2013) AND ITO VS. MIDAS DFS (P) LTD. (IT A NO. 30/KOL/2012 DATED 13-11-2013). IN LIGHT OF THAT, EVEN IF THE S AID DECISION OF COORDINATE BENCH IS NOT ACCEPTABLE TO THE LD. CIT AND HE HELD A DIFFERENT VIEW, THE VIEW TAKEN BY THE AO CANNOT BE HELD TO BE ERRONEOUS IN L AW. HENCE, WE HOLD THAT THE VIEW TAKEN BY THE AO CANNOT BE HELD TO BE ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THIS VIE W OF THE MATTER, THE ORDER OF THE LD. CIT CANNOT BE SUSTAINED. 4.1 NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2008-09 WHEREIN SIMILAR GROUND HAS BEEN RAISED AS R AISED IN THE APPEAL FOR THE ASSESSMENT YEAR 2007-08. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUES AS RAISED BY THE AS SESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2008-09 ARE SIMILAR TO THE ISSUES F OR THE ASSESSMENT YEAR ITA NO. 365/JP/2012 M/S. GOENKA JEWELLERS VS. CIT -1, JAIPUR 15 2007-08 WHEREIN THE ORDER OF THE AO HAS BEEN ALLOWE D AND THE ORDER OF THE LD. CIT HAS BEEN DISMISSED. THE DECISION TAKEN BY T HIS BENCH IN THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 SHA LL APPLY MUTATIS MUTANDIS TO THE APPEAL OF THE ASSESSEE FOR THE 2008-09 ALSO. 5.0 IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /10/20 15. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. GOENKA JEWELLERS, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE CIT-1, JAIPUR 3. VK;DJ VK;QDR@ CIT, 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 5. XKMZ QKBZY@ GUARD FILE (ITA NO.365/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR