ACIT, Jaipur V. M/S GOENKA DIAMONDS & JEWELLERS LTD., Jaipur

ITA 645/JPR/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0472 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ROLEE AGARWAL
• Assessee Lawyers: G G MUNDRA
• Section: 143(3); 10AA; 6

Judgement Text

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 VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 645/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 THE A.C.I.T. CIRCLE-2, JAIPUR. CUKE VS. M/S GOENKA DIAMONDS & JEWELLERS LTD., 401, PANCHRATNA, M.S.B. KA RASTA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAACG 7934 Q VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 54/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 645/JP/2012) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 M/S GOENKA DIAMONDS & JEWELLERS LTD., 401, PANCHRATNA, M.S.B. KA RASTA, JAIPUR. CUKE VS. THE A.C.I.T. CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAACG 7934 Q IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : MRS. ROLEE AGARWAL (CIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI G.G. MUNDRA (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/04/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 23/04/2015 ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 25/04/2012 PASSED BY THE LEARN ED CIT(A)-I, JAIPUR FOR A.Y. 2009-10. THE GROUND OF REVENUES APPEAL AN D GROUND OF THE C.O. ARE AS UNDER:- GROUND IN REVENUE APPEAL. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) IS JUSTIFIED IN ALLOWING DEDUCTION OF RS. 25,37,14,968/- U/S 10AA OF THE I.T. ACT, 1961 AS CONDITION LAID DOWN IN THE SECTION 10AA OF T HE I.T. ACT, 1961 FOR CLAIMING THE DEDUCTION ARE NOT FULFIL LED. GROUND IN ASSESSEES C.O. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LA W IN UPHOLDING DISALLOWANCE OF DIRECTORS REMUNERATION TO THE EXTENT OF RS. 1406790/- FROM PROFITS OF DOMESTIC UN IT OF THE APPELLANT ON THE ALLEGED GROUND AND DIRECTORS ARE D OING WORK OF BOTH SEZ AND DOMESTIC UNIT OF THE COMPANY. 2. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSES SEE IS ENGAGED IN BUSINESS OF TRADING AND MANUFACTURING OF PRECIOU S AND SEMI PRECIOUS STONES, DIAMOND AND STUDDED GOLD JEWELLERY. THE RETUR N OF A.Y. 2009-10 WAS FILED BY THE ASSESSEE ON 30/09/2009 AND SUBSEQUE NTLY REVISED IT ON 29/03/2011 DECLARING TOTAL INCOME OF RS. 3,44,19,94 0/-. THE CASE WAS ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 3 SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED AS THE ACT). DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE CLAIMED DEDUCTION U/S 10AA OF THE ACT WITH RESPECT T O SURAT UNIT. THE ASSESSEE IS ACTUALLY RUNNING THREE UNITS (I) SURAT (II) MUMBAI AND (III) HEAD OFFICE AT JAIPUR WHERE NO MANUFACTURING SET UP IS MADE. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON SURAT UNIT THAT CLAIM OF DEDUCTION U/S 10AA OF THE ACT IS AS PER LAW OR NOT. THE ASSESSEE FILED EXPLANATION VIDE LETTER DATED 17/ 10/2011, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE NO S. 2 TO 7 OF THE ASSESSMENT ORDER. THE ASSESSEE FILED ANOTHER LETTER ON 01/11/2011, WHICH HAS ALSO BEEN REPRODUCED BY THE ASSESSING OFFI CER ON PAGE NOS. 7 AND 8 OF THE ASSESSMENT ORDER. THE LD ASSESSING OF FICER HELD THAT IN THE INCOME TAX ACT, THE LEGISLATURE HAD CHOSEN TO EX CLUDE THE DEFINITION OF SERVICE FROM THE SPECIAL ECONOMIC ZON E (IN SHORT SEZ) FROM ITS SCOPE, THEREFORE, DEFINITION OF SERVICES CAN BE IMPORTED FROM SEZ ACT. THE LD ASSESSING OFFICER EXAMINED IN DETAIL THE DEFINITION OF SERVICES. SHE FURTHER HELD THAT EXPLANATION OF SECT ION 10AA INCLUDES SERVICES OF ON SITE DEVELOPMENT OF COMPUTER SOFTWARE (INCLUDING SERVICES FOR DEVELOPMENT OF SOFTWARE) OUTSIDE INDIA. THIS EXPLAINS THE ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 4 INTENTION OF THE LEGISLATURE REGARDING WHAT NATURE O F SERVICES WILL BE INCLUDED IN SERVICES. THE ASSESSEE IS NOT IN MANUFAC TURING ACTIVITY AS IT IS NOT HAVING MACHINERY SET UP TO DO SO. MOREOVER, IT IS MERELY ENGAGED IN TRADING WHICH IS IMPORT AND EXPORT WITHOUT ANY VAL UE ADDITION WHICH CANNOT BE TERMED UNDER SERVICES. HENCE THE ASSESSEE S CLAIM FOR 10AA REGARDING SURAT UNIT IS NOT JUSTIFIED. THE ASSESSEE S ARGUMENT BEFORE HER THAT LETTER OF APPROVAL BY THE DEVELOPMENT COMM ISSIONER AS PER SEZ ACT AND DEDUCTION ALLOWED IN PRECEDING YEARS WAS NOT FOUND CONVINCING HER TO ALLOW DEDUCTION U/S 10AA OF THE AC T ON IMPORTING THE GOODS AND REEXPORTING THE SAME. IN THE ASSESSEES C ASE, THE LD CIT(A) HAD ALLOWED 10AA DEDUCTION IN A.Y. 2008-09 BUT WHICH HAS BEEN PENDING BEFORE THE ITAT OR HIGHER FORUM OF APPEAL, T HEREFORE, SHE DISALLOWED THE CLAIM OF THE ASSESSEE. THE ASSESSEE H AS DEBITED VARIOUS EXPENSES IN THE P&L ACCOUNT AND HAD NOT SEGREGATED AS PER SEZ UNIT AND MUMBAI UNIT BUT IT HAD BEEN CLAIMED WHOLLY IN TH E MUMBAI UNIT TO INFLATE THE PROFIT IN SEZ UNIT PARTICULARLY REMUNER ATION TO THE DIRECTORS, THEREFORE, SHE GAVE THE ANOTHER OPPORTUNITY TO APPO RTION THE EXPENDITURE BETWEEN THE UNITS. THE ASSESSEE SUBMITTE D THAT SURAT UNIT WAS CONTROLLED BY THE EMPLOYEES AND MANAGERS FROM SU RAT. HOWEVER, ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 5 POLICY DECISIONS WERE TAKEN BY THE DIRECTORS AT THE OFFICE OF MUMBAI BUT THESE SUBMISSIONS WERE ALSO NOT FOUND CONVINCING TO HER. AFTER CONSIDERING THE ASSESSEES REPLY, SHE APPORTIONED T HE DIRECTORS SALARY ON THE BASIS OF TURNOVER. FINALLY SHE MADE ADDITION OF RS. 25,37,14,968/- IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND SUBMISSIONS OF THE AR. ALONGWITH THE ASSESSMENT ORDE R IN THE CASE OF THE ASSESSEE FOR A.Y. 2008-09. FOR A.Y. 2008- 09, THE MATTER WAS DECIDED ON SAME FACTS BY ITAT, JAI PUR BENCH IN THE CASE OF THE APPELLANT. AFTER A DETAILE D DISCUSSION IT WAS OBSERVED THAT AS PER SECTION 51 OF THE SEZ ACT IT IS MENTIONED THAT NOTWITHSTANDING ANYTHIN G INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR TIME BEING IN FORCE OR IN ANY INSTRUMENT HAVING EFFECT B Y VIRTUE OF ANY LAW OTHER THAN THIS ACT, THE PROVISIONS OF SE Z ACT WILL PREVAIL. THE HONBLE ITAT, JAIPUR BENCH FURTHER OBSER VED THAT THE IMPLICATION OF SECTION 51 OF THE SEZ ACT WA S THAT ANYTHING INCONSISTENT TO THE PROVISIONS OF THE SEZ ACT WILL NOT BE CONSIDERED. THUS, THE WORD SERVICES AS MENT IONED ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 6 IN SECTION 10AA COULD NOT BE CONSTRUED INCONSISTENT LY WITH THE DEFINITION OF THENSERVICES, GIVEN IN THE SEZ ACT. SINCE, UNDER THE SEZ ACT, TRADING IS INCLUDED IN THE TERM SERVICES TRADING THAT IS EXPORT OF IMPORTED GOODS WAS HELD TO BE SERVICES AND THE ASSESSEE WAS ALLOWED THE DEDUCTION U /S 10AA OF THE I.T. ACT. THE A.O. IN HER ORDER IN A.Y. 2009-10 HAS GIVEN THE SAME FACTS AND ARGUMENTS AS DISCUSSED IN THE ORDER FOR A .Y. 2008-09. NO NEW FACTS OR ARGUMENTS HAVE BEEN BROUGHT ON RECORD TO CONTROVERT THE FINDING OF THE HONBLE ITA T, JAIPUR BENCH IN THE CASE OF THE ASSESSEE. AS THIS GROUND O F APPEAL AND ISSUES RAISED DURING THIS A.Y. ARE COVERED BY T HE FINDING OF THE HONBLE ITAT, JAIPUR BENCH VIDE ITS O RDER SUPRA, THE ASSESSEE IS ALLOWED THE CLAIM U/S 10AA AN D THE ADDITION OF RS. 25,37,14,968/- IS DELETED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D SR.D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR FOR THE ASSESSEE HAS SUBMITTED THAT SECTION 10AA OF THE ACT WAS INSERTED IN INCOME TAX ACT, 1961 VIDE SECOND SCHEDUL E OF SPECIAL ECONOMIC ZONES ACT, 2005 W.E.F. 10/02/2006. THE ASSES SEE COMPANY IS AN ENTREPRENEUR WITHIN THE MEANING OF SECTION 10AA O F THE ACT, WHO HAS SET UP A UNIT AS PER SEZ ACT READ WITH SECTION 1 0AA OF THE ACT. AS ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 7 PER SECTION 10AA, 100% DEDUCTION ON PROFIT AND GAIN DERIVED FROM EXPORT OF THINGS AND ARTICLES MANUFACTURED OR PRODU CED OR PROVIDING SERVICES FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMEN T YEARS. THE DEFINITION OF MANUFACTURING IN SECTION 10AA HAS BEE N ASSIGNED TO IT IN CLAUSE (2) OF SEZ ACT, 2005, WHICH INCLUDES POLISHIN G AS MANUFACTURING ACTIVITY. THE SERVICE WORD HAS BEEN DEFINED IN SEZ AC T, WHICH ALSO COVERED UNDER THE GENERAL AGREEMENT ON TRADE IN SER VICE. THE COMMERCE MINISTRY VIDE INSTRUCTION NO. 4/2006 HAS D ECIDED THAT WHILE UNITS IN THE SPECIAL ECONOMIC ZONE, WHO HOLD APPROVA L TO DO TRADING ACTIVITIES WILL BE ALLOWED TO CARRY OUT ALL FORMS OF TRADING ACTIVITY, THE BENEFITS U/S 10AA WILL EXCLUDE TRADING OTHER THAN TR ADING IN THE NATURE OF REEXPORT OF IMPORTED GOODS. SECTION 51 OF THE SE Z ACT REPRODUCED AS UNDER:- SEC 51: THE PROVISIONS OF THIS ACT SHALL HAVE EFF ECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FOR CE OR IN ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. THE LD AR FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TAX RECOVERY OFFICER VGS. CUSTODIAN APPOINTE D UNDER THE SPECIAL COURT (2007) 293 ITR 369 AND THE HON'BLE SUP REME COURT HAD ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 8 INTERPRETED THIS LANGUAGE THAT THE LAW OF THE SAID A CT WILL PREVAIL OVER THE INCOME TAX ACT. HE FURTHER ARGUED THAT THE HONB LE ITAT, JAIPUR BENCH, HAS DECIDED THIS ISSUE IN ASSESSEES OWN CASE IN FAVOUR OF THE ASSESSEE. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COORDI NATE BENCH IN ITA NO. 509/JP/2011 FOR A.Y. 2008-09 IN ASSESSEES OWN CASE HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 2.18 THE HON'BLE APEX COURT IN THE CASE OF STATE OF HARYANA VS. M/S. MAHABIR VEGETABLE OILS (P) LTD. 2011-TIOL- 24- SC-CT HAD AN OCCASION TO CONSIDER THE APPLICABILITY OF PROMISSORY ESTOPPEL ON PUBLIC AUTHORITIES. IN THE C ASE BEFORE HON'BLE APEX COURT, THE STATE OF HARYANA IN INDUSTRIAL POLICY FOR THE PERIOD 01-04-1988 TO 31-0 3- 1997 PROMISED TO GIVE INCENTIVE BY WAY OF SALES TAX EXEMPTION FOR THE INDUSTRIES SET UP IN BACKWARD AREA S OF THE STATE. SCHEDULE III APPENDED TO THE RULES PROVI DES FOR A NEGATIVE LIST OF THE INDUSTRIES AND AT THE IN ITIAL STAGE THE SOLVENT EXTRACT PLANT WAS ADMITTEDLY NOT INCLUDED IN THE NEGATIVE LIST. ON 16 TH DEC. 1996, AMENDMENT TO THE DRAFT RULES WERE NOTIFIED AND ACCORDING TO WHICH SALES TAX BENEFIT WAS TO BE GIVEN TO THE INVESTMENT MADE UPTO 3 RD JAN. 1996 AND SOLVENT ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 9 EXTRACTION PLANT WAS ALSO PLACED IN NEGATIVE LIST. TH E HON'BLE APEX COURT AFTER CONSIDERING THE DOCTRINE O F PROMISSORY ESTOPPEL HELD THAT THE ASSESSEE WILL BE ENTITLED TO SALES TAX EXEMPTION IN RESPECT OF THE INVESTMENT MADE UPTO 16 TH DEC. 1996, THOUGH THE DRAFT RULES WERE CIRCULATED ON 03-01-1996. IT WILL BE USEF UL TO REPRODUCE THE HEAD NOTE OF THIS CASE. IT IS INDEED DIFFICULT TO SEE ON WHAT PRINCIPLE CA N A GOVERNMENT, COMMITTED TO THE RULE OF LAW, CLAIM IMMUNITY FROM THE DOCTRINE OF PROMISSORY ESTOPPELS: IT IS ELEMENTARY THAT IN A REPUBLIC GOVERNED BY THE RULE OF LAW, NO ONE, HOWSOEVER HIGH OR LOW, IS ABOVE THE LAW. EVERYONE IS SUBJECT TO THE LAW AS FULLY AND COMPLETE LY AS ANY OTHER AND THE GOVERNMENT IS NO EXCEPTION. IT IS INDEED THE PRIDE OF CONSTITUTIONAL DEMOCRACY AND RU LE OF LAW THAT THE GOVERNMENT STANDS ON THE SAME FOOTING AS A PRIVATE INDIVIDUAL SO FAR AS THE OBLIGATION OF THE LAW IS CONCERNED: THE FORMER IS EQUALLY BOUND AS THE LATTE R. IT IS INDEED DIFFICULT TO SEE ON WHAT PRINCIPLE CAN A GOVERNMENT, COMMITTED TO THE RULE OF LAW, CLAIM IMMUNITY FROM THE DOCTRINE OF PROMISSORY ESTOPPELS. CAN THE GOVERNMENT SAY THAT IT IS UNDER NO OBLIGATION T O ACT IN A MANNER THAT IS FAIR AND JUST OR THAT IT IS NOT BOUND BY CONSIDERATIONS OF HONESTY AND GOOD FAITH? WHY SHO ULD THE GOVERNMENT NOT BE HELD TO A HIGH STANDARD OF RECTANGULAR RECTITUDE WHILE DEALING WITH ITS CITIZE NS? THERE WAS A TIME WHEN THE DOCTRINE OF EXECUTIVE NECESSITY WAS REGARDED AS SUFFICIENT JUSTIFICATION FOR THE GOVERNMENT TO REPUDIATE EVEN ITS CONTRACTUAL OBLIGA TIONS; BUT, LET IT BE SAID TO THE ETERNAL GLORY OF THIS CO URT, THIS DOCTRINE WAS EMPHATICALLY NEGATIVE AND THE SUPREMAC Y OF THE RULE OF LAW WAS ESTABLISHED. IT WAS LAID DOWN B Y THIS COURT THAT THE GOVERNMENT CANNOT CLAIM TO BE IMMUNE ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 10 FROM THE APPLICABILITY OF THE RULE OF PROMISSORY ES TOPPELS AND REPUDIATE A PROMISE MADE BY IT ON THE GROUND TH AT SUCH PROMISE MAY FETTER ITS FUTURE EXECUTIVE ACTION . 2.19 THOUGH VIDE INSTRUCTION NO. 1/2006 DATED 24-03- 2006, IT WAS CLARIFIED THAT TRADING UNITS CAN BE SET UP IN TH E SEZ. HOWEVER, THE MODIFICATION WAS MADE ON 24-05-2006 IN WHICH IT WAS MADE CLEAR THAT THE DEDUCTION U/S 10AA WI LL BE AVAILABLE IN RESPECT OF THE TRADING IN THE NATUR E OF RE- EXPORT OF IMPORTED GOOD. THUS THE ASSESSEES WERE PROMISED THAT THEY WILL BE ELIGIBLE FOR DEDUCTION U/ S 10AA OF THE ACT IN RESPECT OF THE PROFIT EARNING ON TRAD ING OF RE- EXPORT OF IMPORTED GOODS. THE REVENUE HAS NOT BEEN A BLE TO SHOW US THAT SUCH INSTRUCTION WAS NOT WITHDRAWN OR T HE BOARD HAS ISSUED INSTRUCTION THAT INSTRUCTION DATED 24-05- 206 FROM THE MINISTRY OF COMMERCE WILL NOT BE APPLIC ABLE FOR THE PURPOSE OF ALLOWING EXEMPTION U/S 10AA OF TH E ACT. HENCE, IN VIEW OF THE DOCTRINE OF PROMISSORY ESTOPPE L, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION. 2.20 WE HAVE ALSO REPRODUCED SECTION 51 OF THE SEZ ACT. AS PER THIS SECTION, IT IS MENTIONED THAT NOTWITHSTANDI NG ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTH ER LAW FOR THE TIME BEING IN FORCE OR IN ANY INSTRUMENT HA VING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT, THE PROVISION OF SEZ ACT WILL PREVAIL. THE HON'BLE APEX C OURT IN THE CASE OF TAX RECOVERY OFFICER, VS. CUSTODIAN APPO INTED UNDER THE SPECIAL COURT, 293 ITR 369 HAD AN OCCASION TO ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 11 CONSIDER THE MEANING OF LANGUAGE EMPLOYED IN SECTIO N 13 OF THE SPECIAL COURT ACT. IN SECTION 13 OF THE SPE CIAL COURT ACT, IT WAS STATED THAT PROVISION OF THE ACT S HALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWIT H CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FOR CE. THE HON'BLE APEX COURT HELD THAT THERE CAN BE NO MANNER OF DOUBT THAT THE PROVISION OF SPECIAL COURT ACT WHEREV ER THEY ARE APPLICABLE SHALL PREVAIL OVER THE PROVISIO N OF THE INCOME TAX ACT. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. VASISTH CHAY VAAPAR LTD., 330 ITR 440 HEL D THAT WHEN THERE IS A PROVISION IN ANOTHER ENACTMENT WHICH CONTAINS A NON OBSTENTE CLAUSE THAN THAT WOULD OVERR IDE THE PROVISIONS OF THE INCOME TAX ACT. THUS ONE WILL HA VE TO CONSIDER THE IMPLICATION OF SECTION 51 OF THE SE Z ACT. IT MEANS THAT ANYTHING IN-CONSISTENT TO THE PROVISION OF THE SEZ ACT WILL NOT BE CONSIDERED. THUS THE WORD SERVICE S AS MENTIONED IN SECTION 10AA CANNOT BE CONSTRUED IN- CONSISTENTLY WITH THE DEFINITION OF SERVICES GIVEN I N THE SEZ ACT. UNDER THE SEZ ACT, THE TRADING IS INCLUDED IN THE SERVICES PROVIDED THE TRADING IS EXPORT OF IMPORTED GOODS. WE THEREFORE, FEEL THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 10AA OF THE ACT AND THEREFORE, THE LD . CIT(A) WAS JUSTIFIED IN ALLOWING THE EXEMPTION. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 12 THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE IDENTIC AL, THEREFORE, BY RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE B ENCH IN ASSESSEES OWN CASE FOR A.T. 2008-09, WE ALSO UPHOLD THE ORDER OF THE LD CIT(A). 6. NOW WE ARE COMING ON THE C.O. OF THE ASSESSEE, WHIC H WAS AGAINST CONFIRMING THE ADDITION OF REMUNERATION OF DIRECTOR TO THE EXTENT OF RS. 14,06,790/-. THE ASSESSEE CHALLENGED T HIS ADDITION BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ADDITION BY OBSE RVING AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND SUBMISSIONS OF THE AR. AND I DO NOT CONCUR WITH THE SUBMISSIONS OF THE AR. IT IS PERCEIVED THAT THE DIR ECTORS ARE ALSO THE PROMOTERS OF THE COMPANY AND THEREFORE THE ULTIMATE RESPONSIBILITY FOR THE FINANCIAL SUCCESS O F OPERATIONS OF ALL THE UNITS OF THE COMPANY RESTS WIT H THEM AND IT IS TO THIS END THAT HEFTY SALARIES ARE BEING PAID TO THEM. GIVEN THE SCALE OF THE BUSINESS OPERATIONS OF THE COMPANY IT IS TRUE THAT THEY MAY NOT HAVE BEEN EMPL OYED WITH THE DAY TO DAY OPERATIONS OF A PARTICULAR UNIT BUT THEY CANNOT ABDICATE RESPONSIBILITY FOR THE OVERALL PLAN NING SUPERVISION AND EXECUTION OF THE BUSINESS INCLUDING THE UNIT AT SURAT FOR WHICH THEY WERE GETTING THE REMUNERATIO N. 7. NOW THE ASSESSEE IS IN C.O. BEFORE US. THE LD AR FOR THE ASSESSEE SUBMITTED THAT THE DIRECTORS ARE SITTING AND RESIDI NG IN MUMBAI AND THEY ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 13 WERE DEVOTING TIME ON DTA UNIT OF COMPANY IN MUMBAI AND ALSO DAY TO DAY WORK OF ADMINISTRATION, TAXATION AND ACCOUNTS WOR KS. SEZ UNIT AT SURAT, WHICH IS BEING LOOKED AFTER BY EMPLOYEES AND MANAGERS. THE LD ASSESSING OFFICER HAD NOT BROUGHT OUT ANY EVIDENCE THAT DIRECTORS WERE RENDERING ANY SERVICE TO THE SEZ UNIT AT SURAT. THER EFORE, HE PRAYED TO DELETE THE ADDITION. 8. AT THE OUTSET, THE LD SR. DR HAS SUPPORTED THE O RDER OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE CO MPANY IS RUNNING VARIOUS UNITS, WHICH INCLUDES HEAD OFFICE IN JAIPUR , MUMBAI AND SEZ UNIT AT SURAT. THE OVERALL WORK EITHER TRADING OR MANUFACT URING IS RESPONSIBILITY OF THE DIRECTORS WHEN COMPANY DEALS I N PRECIOUS ITEMS CANNOT DEPEND UPON ONLY EMPLOYEES AND MANAGERS. THEY TAKE THE DECISION WHAT TYPE OF ROUGH DIAMOND SHOULD BE IMPORT ED, HOW IT SHOULD BE PROCESSED AND REEXPORTED. THEY NOT ONLY TAKE THE BUSINESS DECISION BUT ALSO INVOLVE IN THE MANUFACTURING PROCEEDING WHI CH THEY PERFORMED AT SURAT. THEREFORE, WE FIND THAT APPORTIONMENT OF SA LARY AMONG THE TAXABLE AND NON-TAXABLE UNIT IS RIGHTLY DONE BY THE LD ASSESSING OFFICER ITA 645/JP/2012 & CO 54/JP/2012_ ACIT VS. M/S GOENKA DIAMONDS & JEWELLERS LTD. 14 AND CONFIRMED BY THE LD CIT(A). ACCORDINGLY, WE UPHOL D THE ORDER OF THE LD CIT(A). 10. IN THE RESULT, THE REVENUES APPEAL AND C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/04/2014. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 23 RD APRIL, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE A.C.I.T., CIRCLE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S GOENKA DIAMONDS & JEWELLERS LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 645/JP/2012 & C.O. 54/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR