DCIT, New Delhi V. M/s. Om Nanotech Pvt. Ltd., New Delhi

ITA 6473/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3784 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AN D SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.6473/DEL./2015 (ASSESSMENT YEAR : 2011-12) DCIT OM NANOTECH PVT. LTD. CIRCLE-19(1), ROOM NO. 221, VS. 60-UA, 2 ND FLOOR, C.R.BUILDING, JAWAHAR NAGAR I.P.ESTATE NEW DELHI NEW DELHI (PAN : AACCB4275B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AJAY BAHETI, CA REVENUE BY : SHRI AMIT KATOCH, SR. DR DATE OF HEARING : 23.01.2019 DATE OF ORDER : 19 .02.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DY. COMMISSIONER OF INCOME TAX (HERE INAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 24.09.2015 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-7, NEW DELHI QUA THE ASSESS MENT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT : ITA NO. 6473/DEL./2015 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN LAW IN DELETING THE DISALLOWANC E OF EXEMPTION U/S 10AA IN RESPECT OF TRADING IN THE NAT URE OF RE-EXPORT OF IMPORTED GOODS OF RS. 2,09,11,375/- (15,48,56,140-13,39,44,765) BY IGNORING THE PROVISI ON OF THE ACT THAT THE ACTIVITY OF TRADING IS NOT COVERED UNDER THE PROVISION OF THE SECTION 10AA OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING TH E DISALLOWANCE OF EXEMPTION U/S 10AA IN RESPECT OF TR ADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS OF RS. 2,09,11,375/- BY IGNORING THE FACT THAT FOR CLAIMIN G U/S 10AA OF TH INCOME TAX ACT, 1961 PROVISION OF THE AC T, IT IS TO BE FIRST ESTABLISHED THAT THE PROFIT AND GAINS W ERE DERIVED FROM THE INDUSTRIAL UNDERTAKING AND IT IS J UST NOT SUFFICIENT THAT A COMMERCIAL CONNECTION IS ESTABLIS HED BETWEEN EARNED AND THE INDUSTRIAL UNDERTAKING. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED THAT FACTS NECESSARY FOR ADJUDI CATION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY BEING R EGISTERED AS SEZ ITA NO. 6473/DEL./2015 3 UNIT CLAIMED EXEMPTION U/S 10AA OF THE ACT IN RESPE CT OF TRADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. ASSESSEE COMPANY HAS REFLECTED PROFIT AT RS. 15,66,88,613/- BEFORE MAKIN G ADJUSTMENT. THE ASSESSEE COMPANY HAS CLAIMED TOTAL INCOME AT RS. 13 ,82,37,818/- AFTER CLAIMING EXEMPTION U/S 10AA AMOUNTING TO RS. 15,48, 56,140/-. ASSESSEE ALSO CLAIMED THAT THE MAT PROVISIONS ARE N OT APPLICABLE IT BEING AN EXEMPT SEZ UNIT U/S 115JB(VI). AO NOTICED FROM P & L ACCOUNT THAT THE ASSESSEE HAS REFLECTED EXPORT SALE S AND IMPORTS UNDER THE HEAD EXPORT SALES TRADING UNIT AND IMPORT TRAD ING UNIT AT RS. 65,11,78,096/- AND RS. 64,60,08,712/- RESPECTIVELY. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO DISALLOWED T HE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10AA IN RESPECT OF TRAD ING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A ) BY WAY OF FILING APPEAL WHO HAS DELETED THE DISALLOWANCE OF EXEMPTIO N U/S 10AA BY THE AO IN RESPECT OF RE-EXPORT OF IMPORTED GOODS OF RS. 2,09,11,375/-. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. 5. AT THE VERY OUTSET, IT IS BROUGHT TO OUR NOTICE BY THE LD. AR ITA NO. 6473/DEL./2015 4 FOR THE ASSESSEE COMPANY THAT IDENTICAL ISSUE ALLOW ING THE EXEMPTION U/S 10AA IN RESPECT OF TRADING IN THE NATURE OF RE- EXPORT OF IMPORTED GOODS HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THE CO- ORDINATE BENCH OF TRIBUNAL IN ITA NO. 5716/DEL/2014 FOR A.Y. 2010-11 DECIDED ON 24.09.2018. 6. AO HAS DECLINED THE EXEMPTION U/S 10AA ON THE S OLE GROUND THAT TRADING ACTIVITIES ARE NOT COVERED WITHIN THE SCOPE OF ACTIVITIES U/S 10AA AND ONLY INCOME FROM MANUFACTURING ACTIVITIES ARE ELIGIBLE FOR EXEMPTION U/S 10AA. CO-ORDINATE BENCH OF TRIBUNAL D ETERMINED THE ISSUE IN CONTROVERSY IN ASSESSEES OWN CASE IN AY 2 010-11 IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ON PERUSAL OF THE RELEVANT FACTS AND MATERIAL PLACED O N RECORD AS WELL AS THE FINDINGS GIVEN IN THE IMPUGNED ORDER , IT IS SEEN THAT AO HAS DENIED THE CLAIM OF DEDUCTION ON T HE GROUND THAT TRADING ACTIVITIES ARE NOT COVERED WITH IN THE SCOPE OF ACTIVITIES U/S 10AA AND ONLY INCOME WHICH ARE EXEMPTED THAT ARE DERIVED DIRECTLY FROM THE MANUFAC TURING ACTIVITIES OF THE ELIGIBLE UNDERTAKING. SECTION 10A A NOT ONLY APPLIES TO MANUFACTURING ACTIVITIES AS WELL AS PROVIDING OF SERVICES WHICH IS EVIDENT FROM CLAUSE I OF SUB ITA NO. 6473/DEL./2015 5 SECTION 4 OF SECTION 10AA WHICH READS AS UNDER :- (I) IT HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODU CE ARTICLES OR THINGS OR PROVIDE SERVICES DURING THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2006 IN ANY SPECIAL ECO NOMIC ZONE. 4 4.1. THE WORDS SERVICES HAS NOT BEEN DEF INED IN SECTION 10AA AND THEREFORE, SUCH A DEFINITION HA S TO BE IMPORTED FROM SEZ ACT WHEREIN SECTION 2(Z) DEFINES SERVICES IN THE FOLLOWING MANNER :- SECTION 2(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 CONDUCED AT MARRAKES ON TH E 15TH DAY OF APRIL, 1994; (II) MAY BE PRESCRIBED BY THE CENTRAL GOVERNMENT FO R THE PURPOSES OF THIS ACT ; AND (III) EARN FOREIGN EXCHANGE; 4.2. AN AMENDMENT IN RULE 76 OF THE SEZ RULES READ WITH EXPLANATION THERETO PROVIDES THAT THE EXPRESSION TR ADING ITA NO. 6473/DEL./2015 6 FOR THE PURPOSE OF SECOND SCHEDULE OF THE ACT SHALL MEAN IMPORT FOR THE PURPOSE OF RE-EXPORT. MINISTRY OF CO MMERCE AND INDUSTRY VIDE INSTRUCTION NO. 4/2006 HAS CLARIF IED THIS DOUBT IN THE FOLLOWING MANNER: ..IT HAS BEEN DECIDED THAT WHILE UNITS IN THE SPE CIAL ECONOMIC ZONE WHO HOLD APPROVAL TO DO TRADING ACTIV ITIES WILL BE ALLOWED TO CARRY OUT ALL FORMS OF TRADING A CTIVITY, THE BENEFITS UNDER SECTION 10AA WILL EXCLUDE TRADIN G OTHER THAN TRADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. APPROPRIATE AMENDMENTS IN THIS REGARD ARE BEING ISS UED. 4.3. SIMILARLY CIRCULAR NO. 17 OF 29.5.2006 ISSUED BY THE EXPORT PROMOTION COUNCIL FOR EOUS AND SEZ UNIT HAS CLARIFIED THIS ISSUE IN THE FOLLOWING MANNER :- IN THE MEANTIME, SOURCING FROM DOMESTIC AREA MAY B E PERMITTED BY UNITS IN THE SEZS WHICH ARE ALLOWED TO DO TRADING SUBJECT TO THIS CIRCULAR BEING CITED ON PRE SCRIPTION OF AN UNDERTAKING BY THE CONCERNED UNIT THAT NO INC OME - TAX BENEFIT WILL BE AVAILED BY THE 5 UNIT FOR TRADI NG EXCEPT IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS. 4.4 SECTION 51 OF SEZ ACT CLEARLY PROVIDES THAT THE ITA NO. 6473/DEL./2015 7 PROVISIONS OF THIS ACT SHALL HAVE THE OVERRIDING EF FECT. THUS, THE DEFINITION AS GIVEN UNDER SEZ ACT FOR THE TERM SERVICES HAS TO BE TAKEN FOR THE PURPOSE OF THE I NCOME TAX ACT ALSO WHICH INCLUDES TRADING IN THE NATURE O F IMPORT FOR THE PURPOSE OF RE-EXPORTS. HENCE, SUCH SERVICES OSTENSIBLY FALL WITHIN THE AMBIT AND SCOPE OF SECTI ON 10AA. ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF MEMORY MODULES, FLASH DRIVES, IC CHIPS E TC. AND IT HAS CLAIMED DEDUCTION U/S 10AA IN RESPECT OF TRA DING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS AND ENTIR E EXPORTS OF THE TRADING UNIT ARE UNDISPUTEDLY FROM S EZ UNIT; AND THEREFORE, ASSESSEE IS ELIGIBLE FOR DEDUCTION U /S 10AA. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LD. CIT (A) AND THE SAME IS AFFIRMED. 7. FOLLOWING THE DECISION RENDERED BY THE CO-ORDIN ATE BENCH OF TRIBUNAL ON THE IDENTICAL SET OF FACTS WHICH IS APP LICABLE TO THE CONTROVERSY AT HAND, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE IS UNDISPUTEDLY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF MEMORY MODULES, FLASH DRIVES, ICCHIPS ETC., IT IS ENTITLED FOR CLAIM OF DEDUCTION U/S 10AA QUA TRADING IN THE NATURE OF RE-EXPORT OF IMPORTED GOODS AS IT IS NOT IN DISPUTE THAT THE ENTIRE EXPORTS OF ITA NO. 6473/DEL./2015 8 TRADING UNITS ARE FROM SEZ UNIT. SO FINDING NO ILLE GALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY LD. CIT(A), THE PRE SENT APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 1 9 TH FEB., 2019. SD/- SD/- (B.R.R.KUMAR) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 19/02/ 2019 BR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXVI, NEW DELHI. 5. CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI DATE OF DICTATION 18.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 19.02.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 19.02.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 19.02.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER ITA NO. 6473/DEL./2015 9