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M/s. Ossian Exports 4.2.1 Per contra, the learned A.R. of the assessee contended that there was no error in the learned CIT(A)'s order in allowing the assessee's claim for deduction under section 10AA of the Act. According to the learned A.R., the assessee was engaged in the business of trading in diamond and gold jewellery and had claimed deduction under section 10AA of the Act in respect of income earned from trading activity in import/export of cut and polished diamonds in its SEZ unit at Surat. It is submitted that in the course of assessment proceedings, the Assessing Officer (AO) came to the view that in the year under consideration the assessee had neither manufactured or produced any goods or articles nor provided any services, as the imported diamonds were merely immediately re-exported, therefore its claim for deduction under section 10AA was not allowable and is to be disallowed. In coming to this finding, the AO rejected the assessee's contention that the term 'services' as used in section 10AA(9) of the Act should be read as defined in the SEZ Act, 2005 which would override the provisions of section 10AA of the Act.

4.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited (supra). On an appreciation of the material on record, it is seen that in the course of assessment proceedings, while examining the assessee's trading activities in connection with its claim for deduction under section 10AA of the Act, the AO observed that assessee had merely imported diamonds from Dubai and the same without any value addition was immediately re-exported to Dubai. The AO was of the view that, since the assessee had neither manufactured or produced any goods or articles nor provided any services during the year while trading in exports, deduction under section 10AA is not allowable. In coming to this finding the AO rejected the assessee's claim that the term 'services' under section 10AA(9) of the Act should be read as defined in Section 2(z) and Section 51(1) of the SEZ Act, 2005 and Rule 76 of SEZ Rules, 2006 thereunder, which overrides the Act.

We noted that learned CIT(A) has taken into considering the aspect and observation of the AO that deduction under Section 10AA is not allowable for the reason that the assessee has not carried out any manufacturing activity but has done trading of goods only. For this purpose, learned AO has placed reliance on the order of Hon'ble Delhi High Court. Learned CIT(A) has taken into consideration these observation of the AO and thereafter he found that the Government of India has issues a circular No.17 of 29.5-2006, which was issued by Export Promotion Council For EOUs & SEZ Unit (Ministry of Commerce & Industry, Government of India). The contents of the Circular have also been incorporated in the finding of the learned CIT(A), which have also been reproduced somewhere above in this order. Therefore, we are not repeating the contents of that circular issued by the Ministry of Commerce & Industry, Government of India). Under Section 51(1) of the SEZ Act, it has been clearly provided that the provision of this Act has overriding effect in case of contradiction between the SEZ Act and other Act. Hence, by virtue of Section 51 of the SEZ Act, the provision of SEZ Act and rules will have overriding effect over the provision contained in any other Act. Learned CIT(A) has taken into consideration this circular issued by Government of India and the provision of Section 51 of the SEZ Act and found that trading done by the assessee is a service and, therefore, deduction under Section 10AA is allowable. We further noted that on similar facts in case of Goenka Diamonds and Jewellery Limited (supra), the Jaipur Bench of the Tribunal has discussed the issue in detail. The provisions of Section 51 of SEZ Act were also considered. The decision of the Hon'ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed Under The Special Court, reported in the case of 211 CTR 369 (SC) and the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd., reported in 238 CTR M/s. Ossian Exports 142 (Delhi), were also taken into consideration and thereafter it was concluded that in view of the Instruction No.1 of 2006, dated 24- 3- 2006 as modified by Instruction No.4 of 2006, dated 24-5-2006 issued by the Ministry of Commerce & Industry, Government of India and the definition of service given in the SEZ Act, 2005, which overrides the word 'service' accruing in Section 10AA by virtue of Section 51 of the SEZ Act. The assessee engaged in trading in nature of re-export of imported goods and for the same the assessee was entitled deduction under Section 10AA of the Act. Facts are similar before us, as the assessee is engaged in trading of re-export of imported goods and, therefore, the assessee is entitled for deduction under Section 10AA of the Act. All the arguments advanced by the learned DR before us have also been taken care of by the Tribunal while discussing the appeal in the case of Goenka Diamonds and Jewellery Limited (supra). It is further noted that the main plank of argument of learned DR is that rules provided under the SEZ Act cannot partake the character of the Section of the Income Tax Act. We find that in the SEZ Act under Section 51, it has been clearly provided that the provision of SEZ Act will override the provision of any other Act, meaning thereby the provision provided under the SEZ Act has to override on the provision of Section 10AA of the Income Tax Act. Under the rules, it is not provided but under Section 51 of the SEZ Act, it is provided, therefore, in our view, the contention raised by the learned DR is not tenable. Moreover, the issue is squarely covered by the decision of the coordinate Bench in the case of Goenka Diamonds and Jewellery Limited (supra). Therefore, respectfully following the decision of the Tribunal in the case of Goenka Diamonds and Jewellery Limited (supra) and in view of the reasoning given by the learned CIT(A), we confirm his order."

7.2 Per contra, the learned D.R. supported the finding of the authorities below that the income earned on the aforesaid FD constitutes income from other sources and since it was not part of the assessee's business income, would not be entitled for deduction under section 10AA of the Act.

7.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncement cited. The facts on record indicate that the assessee in the course of its business of import/export trading in diamonds earned interest income from FDs kept in Bank as per instructions of Bank by way of margin money for the purpose of assessee's business and the assessee considering the same as business receipts/income, claimed deduction thereon under section 10AA of the Act. Revenue, however, treated the same as 'income from other sources' and thereby disallowed the assessee's claim thereon for deduction under section 10AA of the Act.