1999 (3) TMI 10 - SC - Income Tax

Assessee contend that while granite is a mineral in the general sense it is not a mineral for purposes of section 80HHC and that therefore the deduction provided for therein is available to the assessee - Tribunal was right in holding that the assessee is not entitled to the allowance claimed u/s 80HHC in respect of the granite exported from India

Summary

Issues:
1. Interpretation of the term 'mineral' under section 80HHC(b)(ii) of the Income-tax Act, 1961.
2. Eligibility of the assessee for deduction under section 80HHC for exporting granite.

Analysis:

The Supreme Court considered the appeal concerning the assessment years 1985-86, 1987-88, and 1988-89, focusing on the interpretation of the term 'mineral' under section 80HHC(b)(ii) of the Income-tax Act, 1961. The primary issue was whether 'granite' qualifies as a 'mineral' within the meaning of the provision. The Court examined the legislative intent behind section 80HHC, which allows deductions for profits derived from exporting certain goods, excluding minerals and ores. The assessee contended that although granite is a mineral in a general sense, it should not be considered a mineral for the purposes of section 80HHC, thus claiming eligibility for the deduction.

The Court analyzed relevant provisions and a circular issued by the Central Board of Direct Taxes, emphasizing that the circular stated granite could be considered a mineral, but any processed form might not qualify as a mineral. However, as per the records, there was no evidence that the exported granite was in a value-added form. The Court noted that the Mines and Minerals Act categorizes granite as a minor mineral, and previous judicial decisions confirmed granite's classification as a mineral, emphasizing the common understanding of the term 'mineral' in commercial and mining contexts.

Furthermore, the Court referred to the doctrine of noscitur a sociis, which suggests interpreting a word based on its association with other terms in the statute. Applying this doctrine, the Court concluded that 'minerals' in section 80HHC should be read in conjunction with 'ores,' indicating that all substances extracted from the earth, including granite, fall under the provision's exclusion of minerals and ores. Consequently, the exporter of granite was deemed ineligible for the deduction under section 80HHC.

In light of the above analysis, the Court dismissed the appeals, upholding the Tribunal's decision against the assessee and ordering the payment of costs. The judgment clarified the scope of the term 'mineral' under section 80HHC and its application to granite exports, setting a precedent for similar cases involving the interpretation of tax laws related to mineral exports.