M/s Apex Metals Pvt. Ltd., an Indian-incorporated entity, establishes two manufacturing units for steel containers - one in a Special Economic Zone…

M/s Apex Metals Pvt. Ltd. has tried to take advantage of tax provisions by diverting profits from DTA 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/s Apex Metals Pvt. Ltd. by transferring the products from DTA 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.