High Court Of Madras
Magam Inc vs. CIT
Section 80HHC
Asst. Years 1987-88, 1989-90
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) Nos. 196 to 198 of 2003
17th July, 2006
Counsel Appeared :
Philip George, for the Assessee : Mrs. Pushya Sitaraman, for the Revenue
JUDGMENT
P.D. Dinakaran, J. :
The above tax case appeals are directed against the order of the Tribunal dt. 4th Sept., 2001, made in ITA Nos. 2871, 2872 and 2724/Mad/1992.
2. The assessee is a registered partnership firm carrying on the business of blasting and excavation of granite and then cutting and polishing them into blocks known in the industry as dimensional blocks. The main submission of the assessee before the CIT(A) was that granite was not to be considered as a mineral and therefore, the relief under s. 80HHC was allowable. The CIT(A) agreed with the appellant and allowed the appeals. On appeal by the Department, the Tribunal held in favour of the Department. Hence, the present appeals raising the following substantial questions of law :
“(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the profits derived from the export of the dimensional granite blocks, being value added marketable commodity, would not be entitled to deduction under s. 80HHC of the IT Act, 1961 ?
(ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant had exported only granite without appreciating or considering the submissions made before it that on conversion into dimensional blocks, the original character of minerals was no longer existing, which was based on the various decisions placed before it ? and
(iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in not following the decision of the self-same Tribunal in the appellant’s own case for the asst. yr. 1988-89 which was placed on its files ?”
3. Learned counsel for the appellant assessee fairly submits that the questions of law raised in these appeals are covered in favour of the Revenue by the decisions in : (i) CIT vs. Pooshya Exports (P) Ltd. (2003) 179 CTR (Mad) 557 : (2003) 262 ITR 417 (Mad); and (ii) Gem Granites vs. CIT (2004) 192 CTR (SC) 481 : (2004) 271 ITR 322 (SC). This Court in CIT vs. Pooshya Exports (P) Ltd. (supra), after referring to the relevant provision of the statute, i.e., s. 80HHC of the IT Act, held that, by virtue of the expression “the export of any goods or merchandise to which this section applies” employed in s. 80HHC and by virtue of sub-s. (2)(b)(ii), which specifically denied the benefit of the section to export of granite (mineral), the benefit under s. 80HHC is not available to the assessee; that by the Amendment Act 2 of 1991, an exception has been carved out to the specific provision which excluded, rather denied the benefit conferred under s. 80HHC to export of minerals (granite); that the amendment brought by the Finance (No. 2) Act of 1991 to s. 80HHC is only prospective and effective from 1st April, 1991; and that the statutory provision is very clear in the sense that s. 80HHC is not applicable to the export of granite. That apart, the apex Court in Gem Granites vs. CIT (supra), held that : “There are no words of restriction which qualify the word ‘minerals’ and it would be reasonable to assume that in the absence of any such limitation, the word must be read to include all kinds of minerals in all its forms, i.e., whether subjected to any process or not as long as it continued to retain the characteristics of the mineral. To hold that the word ‘minerals’ never included processed minerals would require our reading words of limitation into an otherwise clear and unambiguous statutory provision. There is no dispute that granite is covered by the word ‘minerals’ in the exclusionary cl. (b) of sub-s. (2) of s. 80HHC. It would follow that for the unamended s. 80HHC(2) (b) cut and polished granite would also be a mineral.
The introduction of the phrase ‘other than’ in cl. (b) of sub-s. (2) of s. 80HHC in 1991, in our opinion, indicates the carving out of a specific class from the generic class of ‘minerals and ores’. This means, that were it not for the exception, the specified processed minerals and ores would have been covered by the words ‘minerals and ores’. It also indicates that only the minerals and ores subjected to the process of cutting and polishing would be entitled to the benefit of s. 80HHC meaning thereby that all other species of processed minerals and ores would continue to be covered by the general exclusion applicable to the generic class. The 1991 amendment of s. 80HHC thus conclusively demonstrates that the words ‘minerals and ores’ must be construed widely and in an unrestricted manner. As has been held in Municipal Committee vs. Manilal Manekji (P) Ltd. AIR 1967 SC 1201 : (1967) 2 SCR 100 and Pappu Sweets & Biscuits vs. Commr. of Trade Tax (1998) 111 STC 425 (SC) : (1998) 7 SCC 228, subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provisions as it stood earlier. The benefit of s. 80HHC has been extended by the amendment to a specific kind of mineral and was introduced for the first time in 1991. If we were to hold that the word ‘minerals’ in sub-s. (2)(b) never included processed minerals then the 1991 amendment excepting processed minerals from the exclusionary effect of the sub-section would be rendered meaningless and an exercise in futility.”
Following the decisions referred to supra, this Court, by judgment dt. 21st Feb., 2006, made in Tax Case No. 55 of 2000 [CIT vs. Pondy Granites (2006) 204 CTR (Mad) 386 : (2006) 285 ITR 340 (Mad)], held that the profits derived from the export of the dimensional granite blocks, being value added marketable commodity, would not be entitled to deduction under s. 80HHC of the IT Act. Drawing support from the decisions referred to supra, we are of the considered view, that the amendment brought by the Finance (No. 2) Act of 1991 to s. 80HHC of the IT Act is only prospective and effective from 1st April, 1991, and for the asst. yrs. 1987-88 and 1989-90 under consideration, the statutory provision is very clear in the sense that s. 80HHC of the IT Act is not applicable to the export of granite.
In the result, these appeals are dismissed, the questions of law are answered in the affirmative and in favour of the Revenue.
[Citation : 288 ITR 566]
