High Court Of Madras
ITO vs. Sunshine Enterprises
Section 80HHC(2)(b)
Asst. Year 1989-90
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 124 of 2000
22nd February, 2006
Counsel Appeared
Mrs. Pushya Sitaraman, for the Appellant
JUDGMENT
P.D. Dinakaran, J. :
The above tax case appeal is directed against the order of the Tribunal, dt. 11th Nov., 1998 made in ITA No.2626/Mad/1991, raising the following substantial question of law :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to deduction under s. 80HHC of the IT Act, 1961 ?”
2. The brief facts leading to the filing of the above appeal are as under :
2.1 The assessee-firm is engaged in the business of manufacturing and exporting granites. It has filed its return on 30th Nov., 1989 admitting an income of Rs. 5,01,790. The assessee claimed relief under s. 80HHC for the asst. yr. 1989-90 claiming that the activity of excavating granite blocks, cutting and polishing them with the help of machines, amounts to manufacture or production of an article or thing. The AO turned down the claim of the assessee. Hence, the assessee went on appeal before the CIT(A), who, decided the issue in favour of the assessee by following the earlier decisions of the Tribunal.
2.2 Aggrieved by the order of the CIT(A), the Revenue preferred an appeal before the Tribunal, which, confirmed order of the CIT(A). Hence, the Revenue preferred the above appeal.
3. Heard the learned senior standing counsel appearing for the appellant, who states that the issue involved in this appeal is answered in favour of the Revenue by this Court in CIT vs. Pooshya Exports (P) Ltd. (2003) 179 CTR (Mad) 557 : (2003) 262 ITR 417 (Mad), which has been confirmed by the Supreme Court in Gem Granites vs. CIT (2004) 192 CTR (SC) 481 : (2004) 271 ITR 322 (SC).
4. 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 word ‘mineral’ as used in sub-s. (2)(b) to s. 80HHC has been widely discussed by the Supreme Court in Stone Craft Enterprises vs. CIT (1999) 153 CTR (SC) 86 : (1999) 237 ITR 131 (SC), wherein it has been held that :
“The word ‘minerals’ in sub-s. (2)(b) of s. 80HHC must be read in the context of ‘mineral oil’ and ‘ores’ with which it is associated. It seems to us that these words taken together are intended to encompass all that may be extracted from the earth. All minerals extracted from the earth, granite included must, therefore, be held to be covered by the provisions of sub-s. (2)(b) of s. 80HHC, and the exporter thereof, is therefore, disentitled to the benefit of that section.” It is further held therein 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.”
This Court in CIT vs. Pooshya Exports (P) Ltd. (supra), following the dictum referred to above, held that in the absence of any particulars on record to construe that the exported granites are value added, the assessee is not entitled to the benefit under s. 80HHC of the Act. The abovesaid decision of this Court has been affirmed by the Supreme Court in Gem Granites vs. CIT (supra), wherein the Supreme Court has elaborately discussed the assessee’s entitlement of benefit under s. 80HHC towards ‘cut and polished’ granites on the basis of the Board’s circulars, which read as follows :
It is clear from the language used in Circular F. No. 178/206/83-IT(A-I), dt. 22nd May, 1984 that the CBDT gave its understanding of s. 80HHC(2)(b) as it stood prior to the 1991 amendment with regard to diamonds and gem stones having regard to the peculiar facts and features relating to the export and import of diamonds. The circular contains no reference to granite and one cannot extend the understanding of the Board with regard to exclusion of cut and polished diamonds and gems from the word ‘minerals’ to granite in the absence of the special features mentioned in the 1984 circular, more so when the statute itself had not drawn such distinction. The 1994 and 1995 circulars both relate to the interpretation of item No. (x) in Sch. XII and are confined to an exposition of the phrase ‘cut and polished’ used in that item. They do not seek to interpret the word ‘minerals’. The 1994 circular clarified that the phrase ‘cut and polished’ minerals meant exactly that and could not be extended to any other process. The 1995 circular modified the rigour of the 1994 circular to the extent that it recognized some other processes as falling within the phrase ‘cut and polished’. Board circulars clearly state that the benefit of s. 80HHC was available to cut and polished granite only w.e.f. 1st April, 1991, by virtue of the insertion of item No. (x) in Sch. XII.”
7. In view of the forgoing conclusion, we hold that the assessee which exported granite after being cut and polished, was not entitled to claim the deduction under s. 80HHC of the IT Act, 1961, in respect of the profits from the export business for the asst. yr. 1988-89. Accordingly, the order of the Tribunal is set aside and the question of law is answered in favour of the Revenue and the appeal is allowed. No costs.
[Citation : 284 ITR 393]
