ITAT rules import and re-export of goods fall within the ambit of ‘services’ under the SEZ Act

ITAT rules import and re-export of goods fall within the ambit of ‘services’ under the SEZ Act

Rules that the assessee was eligible for deduction under the Income Tax Act

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the import and re-export of goods, carried out by Bytescale Technologies Private Limited, fell within the ambit of ‘services’ under the Special Economic Zone (SEZ) Act, 2005.

Therefore, the assessee was eligible for deduction under Section 10AA of the Income Tax Act.

The assessee was engaged in the import and re-export of goods and was carrying out its trading activities from SEZ for Free Trade and Warehousing Zone (FTWZ) at Sai Village, Raigarh.

The assessee claimed deduction under Section 10AA of the IT Act on profit and gains derived from export/services carried out from the specified SEZ unit.

The assessing officer (AO) disallowed the deduction, stating that the assessee was not involved in manufacturing or producing any article or providing any services.

However, the Commissioner of Income Tax (Appeals) reversed the decision. It allowed the deduction considering trading activities (including import and re-export), as falling within the definition of ‘services’, as defined under Section 2(z) of the SEZ Act.

The tribunal noted that the definition of ‘service’ under Section 2(z) of the SEZ Act and Rule 76 of the SEZ Rules 2006, stated that trading activities were included within the scope of services.

Additionally, ITAT observed a 20 June 2011 letter from the office of the SEZ Development Commissioner, Santacruz Electronics Export Processing Zone (SEEPZ). It provided clarification that trading referred to the import for the purpose of re-export.

Also, the clarification from the Ministry of Commerce & Industries further strengthened the understanding that the import of goods for the purpose of export was considered a ‘service.’