M/s RH Steels Ltd. is a company incorporated in India. It sets up two units, one in a Special Economic Zone (SEZ) and another in non-SEZ area for…

M/s RH Steels Ltd. has tried to take advantage of tax provisions by diverting profits from non-SEZ unit to SEZ unit. This is not the intention of the SEZ legislation. However, such tax avoidance is specifically dealt with through the provisions contained in section 10AA (9) , as per which provisions of section 80-IA (8) would get attracted in such a case. Further, if the aggregate of such transactions entered into in the relevant previous year exceed the threshold of 20crore, domestic transfer pricing regulations under section 92BA would be attracted. Thus, in this case, due to application of specific anti-avoidance provisions, no tax benefit can be derived by M/ RH Steels Ltd. by transferring the products from non-SEZ unit to SEZ unit at less than fair market value. Hence, the Revenue need not invoke GAAR in such a case, though GAAR and SAAR can co-exist as per clarification given in the CBDT Circular.