Karnataka H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing the AO to allow deduction under s. 80HHC in respect of export of blocks of granite, cut and polished to certain extent only, for the asst. yr. 1992-93 ?

High Court Of Karnataka

CIT vs. Surinder Kumar Khanna

Section 80HHC

Asst. Year 1992-93

V.K. Singhal & T.N. Vallinayagam, JJ.

IT Ref. Case No. 287 of 1998

17th November, 1999

Counsel Appeared

M.V. Seshachala, for the Revenue

JUDGMENT

BY THE COURT :

The Tribunal has referred the following question of law arising out of its order dt. 29th May, 1997, for the asst. yr. 1992-93 “Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing the AO to allow deduction under s. 80HHC in respect of export of blocks of granite, cut and polished to certain extent only, for the asst. yr. 1992-93 ?”

The facts of the case are that the assessee is in the business of export of granite books. It claimed deductions under s. 80HHC on the export income. The same was however refused by the AO on the ground that the assessee exports merely blocks of granite without getting them cut and polished as is required under the provisions of the Twelfth Schedule to the IT Act, 1961. The CIT(A) upheld the order of the AO. During the course of the further appeal filed by the assessee before the Tribunal, the Tribunal noticed that in the accounts of the assessee for the relevant year, expenses to the extent of Rs. 53,000 on cutting and dressing of the granite blocks and of Rs. 46,390 on polishing thereof, had been shown. The Tribunal thus came to th e conclusion that there was no doubt about the fact that the granite blocks actually exported by the assessee were cut and polished to some extent at least. By following its earlier order dt. 19th May, 1997, in ITA No. 162/Bang of 1996, in the case of God Granites, therefore, the Tribunal held that the assessee is entitled to the deduction under s. 80HHC. The Tribunal, therefore, reversed the decisions of the lower authorities and directed that the deduction under s. 80HHC. The Tribunal, therefore, reversed the decisions of the lower authorities and directed that the deduction under s. 80HHC be allowed to the assessee on the export of granite blocks, as per the provisions of law.

The matter of God Granites referred by the Tribunal came up for consideration before the Division Bench of this Court in CIT vs. God Granites (1999) 156 CTR (Kar) 327 : (1999) 240 ITR 343 (Kar) and after considering the judgment of the Supreme Court in the case of Stonecraft Enterprises vs. CIT (1999) 153 CTR (SC) 86 : (1999) 237 ITR 131 (SC), it was observed that : “Stonecraft Enterprises’ case (1999) 153 CTR (SC) 86 : (1999) 237 ITR 131 (SC), was concerned with the asst. yrs. 1985-86, 1987-88 and 1988-89. Sec. 80HHC(2)(b) excluded the application of the section to ‘minerals and ores’. This was the position until 31st March, 1991. It was only w.e.f. 1st April, 1991. The words ‘other than processed minerals and ores specified in the Twelfth Schedule’ were added by the Finance (No. 2) Act of 1991. Hence, until 31st March, 1991, there was no question of claiming any exemption in respect of the profits from exports or minerals and ores. The only argument available to the assessee was that granite was not a mineral. If granite was not a mineral, then the non-application of the section would not have been attracted and, consequently, the assessee claimed exemption. The assessee’s argument was that granite was not a mineral. The Supreme Court rejected the contention of the assessee and held that granite is a mineral. Reference to the circular dt. 1st Nov., 1995, by the Supreme Court was purely tangential. The circular obviously has relevance only after 1st April, 1991, when an exception was made in respect of minerals and ores specified in the Twelfth Schedule. It seems the attention of the Supreme Court was not drawn to the facts that a crucial amendment was made w.e.f. 1st April, 1991, and the circular, if at all, had relevance only in respect of the period after 1st April, 1991. The Supreme Court has also recorded a finding that there was nothing on record to indicate that what the assessee exports is value added granite. The Supreme Court had therefore declined to examine the question. On the contrary in the present case there is a positive finding of the Tribunal that the assessee did in fact do cutting and dressing, including some polishing and that what was exported was dimensional granite blocks which are a valued added item. The case of Stonecraft Enterprises’ case (supra), would not make any difference to the arguments advanced in the present case.”

Since this Court has already upheld the decision given by the Tribunal in God Granites’ case, deduction was allowed by the Tribunal in the case of this assessee. The reference is, accordingly, answered in favour of the assessee and against the Revenue.

The petition stands disposed of with the above observations.

[Citation : 250 ITR 673 ]

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