Section 10AA of the Income-tax Act, 1961—Exemption - Assessee eligible for claim of deduction under Section 10AA as the activity of import of diamonds for re-exporting comes within the nature of 'services' as provided under Section Section 10AA.

Facts: The grievance of the assessee in the present appeal is confined to disallowance of deduction claimed under Section 10AA.

Held, that there is no dispute that assessee is importing diamond for re-export after sorting and grading. It is also not disputed that for carrying out such activity, assessee has a registered unit in SEZ, Surat. So it is governed under the SEZ Act. It is the claim of the assessee from the very inception that import of diamonds for re-export is in the nature of services. Admittedly, the expression 'services' has not been defined either under Section 2 or Section 10AA. Therefore, we have to look to the meaning of 'services' as defined under the SEZ Act and the rules framed thereunder since the provision of Section 10AAt was introduced by the SEZ Act. As per the definition of 'services' under the SEZ Rules, 2006, trading also comes within its ambit. Section 51 of the SEZ Act has an overriding effect to the extent that it makes clear that if there is any inconsistency between the SEZ Act and rules framed thereunder and any other law, the provisions of SEZ Act and rules framed thereunder would prevail. In the aforesaid circumstances, in the absence of definition of 'services' under Section 10AA of the Act, 'services' as defined under the SEZ Act and rules framed thereunder would be relevant. As discussed earlier, the definition of 'services' under the SEZ Act and rules framed thereunder encompasses trading activity also. Therefore, import of diamonds for re-export though, may be in the nature of a trading activity, but is certainly in the nature of 'services', hence would qualify for deduction under Section 10AA. Since the definition of 'services' under the SEZ Act also includes trading activity, the activity relating to import of diamonds for re-export would qualify for deduction under Section 10AA. The aforesaid decision of the Tribunal was upheld by the Hon'ble Rajasthan High Court while discussing a batch of appeals filed by the Revenue against the decision of the Tribunal. Therefore, consistent with the view taken by the different Benches of the Tribunal, we are of the view that assessee is eligible to claim deduction under Section 10AA since, the activity of import of diamonds for re-exporting comes within the nature of 'services' as provided under Section Section 10AA. - SOLITAIRE DIAMOND EXPORTS V/s ITO - [2020] 182 ITD 474 (ITAT-MUMBAI)