$~2 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision: 23.02.2023 + ITA 428/2019 PR. COMMISSIONER OF INCOME TAX-7 ..... Appellant Through: Mr Sanjay Kumar, Sr Standing Counsel with Ms Easha Kadian and Ms Hemlata Rawat, Advs.

versus OM NANOTECH PVT LTD. ..... Respondent Through: Mr Rohit Jain and Mr Aniket D.

Agrawal, Advs.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER HON'BLE MR JUSTICE VIKAS MAHAJAN [Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (Oral):

PREFACE

1. We have heard counsel for the parties. According to us, the matter requires consideration.

1.1 Accordingly, the appeal is admitted.

2. Counsel for the parties agree that the following question of law would arise for consideration:

(i) Whether the Income Tax Appellate Tribunal [in short, “Tribunal”] committed an error in law and on facts in importing the definition of “services” provided under the Special Economic Zones Signature Not Verified Digitally Signed By:TARUN ITA 428/2019 Page 1 of 9 Act, 2005 [in short, “2005 Act”] and Rule 76 of the Special Economic Zones Rules, 2006 [in short, “2006 Rules) framed thereunder, while examining the issue concerning the claim of the respondent/assessee for deduction under Section 10AA of the Income Tax Act, 1961 [in short, “1961 Act”]?

3. Since this is a pure question of law and there is no cavil regarding the facts obtaining in the matter, counsel for the parties have submitted that the matter be heard finally and disposed of.

4. The broad facts, which are required to be noticed for adjudication of this case, are the following:

4.1 The respondent/assessee has set up two units, which are located in the Noida Special Economic Zone [in short, “NSEZ”]. One of these units was into manufacturing, while the other was concerned with trading.

4.2 The manufacturing unit was set up in and about July, 2006. In this said unit, the goods manufactured, amongst others, were memory modules, flash drives and electronic chips.

4.3 The record shows that the respondent/assessee set up a trading unit in and about January 2008. The trading unit was registered on 16.01.2008.

4.4 Concededly, the trading activities of the respondent/assessee involved import of memory modules, flash drives and electronic chips [which, as noted hereinabove, was also being manufactured by it], which, ultimately, were re-exported.

4.5 In the Assessment Year (AY) in issue, i.e., AY 2010-11, the respondent/assessee declared a profit amounting to Rs.15,50,11,806/-, before adjusting deduction claimed under Section 10AA of the 1961 Act, amounting to Rs.14,81,52,422/-. The respondent/assessee, thus, pegged its Signature Not Verified Digitally Signed By:TARUN ITA 428/2019 Page 2 of 9 taxable income at Rs.1,71,69,860/-.

4.6 The Assessing Officer [AO] via the order dated 12.03.2014 disallowed the deduction claimed by the respondent/assessee under Section 10AA of the 1961 Act. The principal reason put forth by the AO for disallowing the deduction was that the deduction could be claimed only against articles manufactured in, or against the services which emanated from, the NSEZ.

5. Being aggrieved, the respondent/assessee carried the matter in an appeal to the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”].

5.1 The CIT(A), via order dated 23.07.2014, ruled in favour of the respondent/assessee and thus, deleted the disallowance made by the AO.

6. Against the order of the CIT(A), the appellant/revenue preferred an appeal with the Tribunal.

6.1 The Tribunal, via the impugned order, sustained the decision of the CIT(A).

SUBMISSIONS OF COUNSEL

7. Mr Sanjay Kumar, learned senior standing counsel, has advanced the submissions in support of the stand taken by the appellant/revenue, while on behalf of the respondent/assessee, arguments have been put forth by Mr Rohit Jain.

8. Mr Kumar has, broadly, submitted that whether or not deductions ought to be granted to the respondent/assesse, is an aspect, which has to be examined by solely looking at the plain language of Section 10