AXCEL GLOBAL SERVICES, MUMBAI V. ITO WD 13(1)(4), MUMBAI

ITA 7435/MUM/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5496 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJORE SATISH CHANDRA LD
• Assessee Lawyers: NEHA LD ARS
• Section: 143(3); 10AA; 234B; 27; 10

Judgement Text

ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , # BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7435/MUM/2014 ( $ $ $ $ %$ %$ %$ %$ / ASSESSMENT YEAR: 2010-11) AXCEL GLOBAL SERVICES PRABHA PALACE BEHIND LAXMI BHAVAN LAJPATRAI ROAD VILE PARLE (W), MUMBAI-400 056. / VS. INCOME TAX OFFICER - 13(1)(4) [NEW ITO -17(1)(2)] AAYKAR BHAVAN, M.K. MARG, NEW MARINE LINES MUMBAI 400 020 & ./ ./PAN/GIR NO. AAOFA-1550-D ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : K. GOPAL AND MS.NEHA- LD. ARS REVENUE BY : RAJORE SATISH CHANDRA - LD.DR + ,- / DATE OF HEARING : 30/11/2018 % + ,- / DATE OF PRONOUNCEMENT : 05/02/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-24 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-24/13(1)(4)/61/13-14 DATED 30/10/2014 ON FOLLOWING GROUNDS OF APPEAL: - 1. THE HON'BLE CIT(A)-24, MUMBAI, SERIOUSLY ERRED I N LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ALLEGED DISALLOWANCE / DENIAL OF ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 2 DEDUCTION / EXEMPTION CLAIMED U/S L0AA OF THE INCOM E TAX ACT,1961 OF RS.1,20,07,900/-, THE CONSIDERATION IN RESPECT OF E XPORTS BY THE APPELLANT UNDERTAKING BEING THE UNIT, OF ARTICLES OR THINGS O R SERVICES RECEIVED IN, OR BROUGHT INTO INDIA AND HAVING FULFILLED ALL THE CONDITIONS ENUMERATED IN SECTION 10AA. YOUR APPELLANT BEING AN ENTREPRENEUR AS REFERRED TO IN C LAUSE (J) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005, IN RESPECT OF REG ISTERED BUSINESS OF WAREHOUSING, MATERIAL MANAGEMENT AND INVENTORY CONT ROL SERVICES CARRIED ON FROM A RECOGNIZED SPECIAL ECONOMIC ZONE (SEZ) VIZ. VISHA KAPATNAM SPECIAL ECONOMIC ZONE (VSEZ), IN TOTAL DISREGARD OF THE EXHAUSTIVE S UBMISSIONS AND ARGUMENTS MADE AND EVIDENCES PRODUCED AND IN TOTAL DISREGARD OF TH E ENABLING PROVISIONS CONTAINED IN SECTION 27 AND SECTION 51 OF THE SEZ ACT,2005 AN D RULE 76 OF THE SEZ RULES,2006. THE ENTIRE ALLEGED DISALLOWANCE / DENIAL, BE DELETE D AND DEDUCTION / EXEMPTION CLAIMED U/S. 10AA BE ALLOWED IN FULL, AS CLAIMED. 2. CONSEQUENTIAL RELIEF ON ACCOUNT OF INTEREST CHAR GED U/S 234B AND 234C BE GRANTED. AS EVIDENT, THE ASSESSEE IS AGGRIEVED BY DENIAL OF DEDUCTION U/S10AA OF THE INCOME TAX ACT, 1961. THE ASSESSMENT FOR IMPUG NED AY WAS FRAMED BY LD. INCOME TAX OFFICER-13(1)(4), MUMBAI [AO] IN SCRUTINY ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 26/03/2013 WHEREIN THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.120.07 LACS AS AGAINST NIL RETURN FILED BY THE ASSESSEE ON 29/07/2010.DURING I MPUGNED AY, THE ASSESSEE BEING RESIDENT FIRM WAS STATED TO BE ENGAGED IN PROVIDING WAREHOUSING & REPAIR / MAINTENANCE SERVICES . THE AFORESAID DEDUCTION OF RS.120.07 LACS U/S 10AA HAS BEEN DENIE D SINCE THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE, IN TH E OPINION OF LD. AO, DID NOT INVOLVE ANY EXPORT OUTSIDE INDIA. 2. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE, VID E REPLIES DATED 05/02/2013 & 01/03/2013 SUBMITTED THAT IT WAS A NEW LY ESTABLISHED UNIT IN SPECIAL ECONOMIC ZONE [SEZ] SET UP WITH THE APPROVAL OF DEVELOPMENT COMMISSIONER, SEZ & STARTED PROVIDING WAREHOUSING SERVICES TO A FOREIGN CLIENT NAMELY M/S M.I.OVERSEAS LIMITED WITH EFFECT ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 3 FROM APRIL, 2008. THEREFORE, HAVING FULFILLED ALL T HE CONDITIONS, IT WAS ENTITLED FOR DEDUCTION U/S 10AA. HOWEVER, THE SAME WAS DENIED ON ACCOUNT OF THE FACT THAT THE SAID ACTIVITY DID NOT INVOLVE ANY EXPORT OUTSIDE INDIA IN TERMS OF EXPLANATION 1 & 2 TO SECT ION 10AA(9) OF THE INCOME TAX ACT. IT WAS ALSO HELD THAT THE EXPRESSIO N SERVICE AS DEFINED U/S 2(Z) OF THE SEZ ACT READ WITH RULE 76 OF SEZ RU LES, 2006 WOULD MEAN ALLIED SERVICES WHICH WERE IN RELATION TO OR INCIDENTAL TO MANUFACTURING OR PRODUCTION OF AN ARTICLE OR THINGS . ANOTHER IMPORTANCE FACT WAS THAT THE FOREIGN COMPANY TO WHOM THE ASSES SEE WAS PROVIDING SERVICES WAS, IN TURN, RENDERING WORK TO INDIAN COM PANIES IN INDIA AND WAS ASSESSED TO TAX IN INDIA. BASED ON THESE FACTS / STATUTORY PROVISIONS, THE DEDUCTION AS CLAIMED BY THE ASSESSEE WAS DENIED BY LD. AO. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITHOU T ANY SUCCESS BEFORE LD. CIT(A) WITHOUT ANY SUCCESS VIDE IMPUGNED ORDER DATED 30/10/2014 WHEREIN IT WAS HELD THAT THERE WAS NO EX PORT OF SERVICES WITHIN THE MEANING OF SECTION 10AA. IT WAS FURTHER HELD THAT THE DEFINITION OF EXPORT AS PROVIDED IN SECTION 2(M) OF SEZ ACT COULD NOT OVERRIDE THE DEFINITION AS PROVIDED IN EXPLANATION TO SECTION 10 AA(9). ACCORDINGLY, THE STAND OF LD. AO GOT CONFIRMED, AGAINST WHICH THE AS SESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI K.GOPAL, SUBMITTED THAT THE ACTIVITY OF WAREHOUSING WAS SPECIFICALLY INCLUDED AS ONE OF THE ELIGIBLE SERVICE UNDER RULE 76 OF SEZ RULES, 2006. IT HAS FURTHER BEEN CONTENDED THAT THE EXPRESSION EXPORTS AS DEFINED IN SEZ ACT SHALL HAVE OVERRIDING EFFECT IN TERMS OF SECTION 2 7 & ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 4 51 OF SEZ ACT. OUR ATTENTION HAS BEEN DRAWN TO THE FACT THE SEZ IS NOT CONSIDERED TO BE PART OF INDIA UNDER SEZ ACT AND THEREFORE, THE TERRITORY IN WHICH THE WAREHOUSE WAS SITUATED WAS OUTSIDE A C USTOM TERRITORY AND THEREFORE, THE AFORESAID SERVICES WOULD AMOUNT TO E XPORT. RELIANCE HAS BEEN PLACED ON THE DECISION OF TRIBUNAL RENDERED IN MIDAS DFS(P) LTD. VS ITO [96 TAXMANN.COM 351] & DCIT GOENKA DIAMOND & JEWELLERS LTD. [19 TAXMANN.COM 91]. PER CONTRA, LD. DR SUPPORTED THE LOGIC OF LOWER AUTHORITIES AND SUBMITTED THAT SINCE EXPORT WAS DEFINED UNDER THE INCOME TAX ACT, THE MEANING AS ASCRIBED THEREIN, WA S ONLY TO BE CONSIDERED TO ASSESS THE ASSESSEES CLAIM. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLA CED IN THE PAPER- BOOK & FINANCIAL STATEMENTS FOR IMPUGNED AY. IT IS UNDISPU TED FACT THAT THE ASSESSEE HAS SET UP UNIT IN VSEZ FOR MANUFACTURING AS WELL AS FOR RENDERING OF SERVICES WHICH IS EVIDENT FROM APPROVA L LETTER DATED 27/03/2007 ISSUED BY THE DEVELOPMENT COMMISSIONER, VISAKHAPATNAM. THE ASSESSEE HAS GOT THE ALLOTMENT OF CERTAIN LAND I.E. PLOT NOS. A3 & A4, PHASE-1, VSEZ. SUBSEQUENTLY, THE ASSESSEE HAS ENTERED INTO A COMPREHENSIVE AGREEMENT FOR REPAIRS & MATERIAL MANAGEMENT SERVICE S DATED 15/02/2008 WITH ANOTHER ENTITY NAMELY M/S M.I.OVERSEAS LIMITED . IN TERMS OF CLAUSE-2 OF THIS AGREEMENT, THE ASSESSE E UNDERTOOK TO PROVIDE SERVICES OF VARIED NATURE AS SPECIFIED THER EIN. AGAINST THE SAME, IT WAS ENTITLED TO RECEIVE CERTAIN MONTHLY MANAGEMENT FEES IN US DOLLARS. THE INVOICES RAISED BY THE ASSESSEE DURING IMPUGNED AY HAS BEEN PLACED ON RECORD, UPON PERUSAL OF WHICH, IT AP PEARS THAT THE NATURE ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 5 OF SERVICES BEING RENDERED BY THE ASSESSEE WERE NOT WAREHOUSING SERVICES SIMPLICITER RATHER THE ASSESSEE WAS PROVIDING COMP REHENSIVE SERVICES IN THE NATURE OF REPAIR/MAINTENANCE SERVICES AND INCURRED COST UNDER VARIOUS HEADS. BOTH THE LOWER AUTHORITIES, IN OUR OPINION, HAVE MISSED OUT THIS VITAL FACTUAL ASPECT AND EXAMINED T HE ASSESSEES CLAIM BY TREATING THESE SERVICES AS WAREHOUSING SERVICES. THEREFORE, AFTER DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES, THE BENCH FORMED AN OPINION THAT, KEEPING ALL ISSUES OPEN, THE MATTER WAS TO BE RESTORED BACK TO THE FILE OF LD. AO TO RE-APPRECIATE THE FACTUAL MATRIX AND RE-ADJUDICATE THE ISSUES AFTER ASCERTAINING THE TRUE NATURE OF SERVIC ES BEING RENDERED BY THE ASSESSEE. NEEDLESS TO ADD THAT REASONABLE OPPOR TUNITY OF BEING HEARD SHALL BE GRANTED TO THE ASSESSEE, WHO IN TURN , IS DIRECTED TO SUBSTANTIATE HIS CLAIM. 6. THE APPEAL STANDS ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2019. SD/- SD/- (MAHAVIR SINGH) (MAN OJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05.02.2019 SR.PS, JAISY VARGHESE / // / / // / / // / / // / / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ! , ! , / DR, ITAT, MUMBAI 6. #$% / GUARD FILE ITA NO.7435/MUM/2014 M/S. AXCEL GLOBAL SERVICES ASSESSMENT YEAR :2010-11 6 / BY ORDER, / / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.