TMI Blog2005 (6) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order is placed on record. We find that similar issue has been dealt with elaborately by the Tribunal in the case of the assessee for the assessment year 1985-86 at pages 1 to 5 of the order. After dealing with the factual and legal position, the Tribunal recorded its finding at Paras 5F and 6, which are reproduced below : "In the case of CIT v. Bombay Dyeing and Mfg. Co. Ltd. 219 ITR 521 , the Hon ble Supreme Court held that the amount contributed to the State Housing Board for constructing tenements for workers was a revenue expenditure. Moreover, it is on record that in the assessee s own case, the Tribunal has, in earlier years, held the construction expenditure of the school as welfare expenses. This finding, not stated to have been challenged, has attained finality. In view of the above, it is clear that the provisions of section 40A(9) are not attracted. The expenditure in question was incurred by the assessee wholly and exclusively for the purpose of its business. This ground, therefore, is allowed." 3. The ld. CIT DR, Shri Rajendra, supported the orders of the Revenue authorities, but, was fair enough to concede that similar issue has been decided in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to restore this issue to the Assessing Officer with the direction that it may be verified as to whether the relevant sales tax has been paid before the due date for filing the return of income under section 139(1). Opportunity may be allowed to the assessee to substantiate this claim and if it is found that payment has been made as mentioned above, the same shall be allowed. 8. The ground Nos. 2 and 3 pertain to disallowance of guest house expenses. Without conceding, the ld. counsel for the assessee was fair enough to admit that this issue is covered against the assessee by the ITAT, Delhi Special Bench decision in the case of Eicher Tractors Ltd. v. Dy. CIT [2003] 84 ITD 49. Accordingly and respectfully following the precedent, the order of the ld. CIT(A) on this issue is confirmed. 9. The ground No. 4 pertaining to disallowance of entertainment expenses has not been permitted by the COD and, therefore, this ground stands rejected as such. 10. The ground No. 5 pertains to disallowance of expenditure incurred by the assessee on construction of school at Haldia under section 40A(9). The facts and circumstances are the same as for the assessment year 1986-87 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 80HH pertaining to the Mathura Refinery by adding the profit of the V.M. Pipeline. Subject to the above, the alternate grounds stand rejected." In the present case also alternative claim as reflected in the grounds of appeal is that the profits of V.M. Pipeline and M.J. Pipelines should be added to the profits of Mathura Refinery. In our view, the assessee must succeed on the alternative claim. As mentioned above, it has already been held by the Tribunal for the assessment year 1985-86 that V.M. Pipeline which is an input pipeline is not a separate industrial undertaking. We, therefore, hold that for the present assessment year also, the V.M. Pipeline and M.J. Pipeline which are the output pipelines for Mathura Refinery cannot be treated as independent industrial undertaking. However, the profits, if any, of these pipelines should be added to the profits of Mathura Refinery for the purpose of section 80HH. Similar claim under section 80-I has been made in respect of M.J. Pipeline, which is the subject-matter of ground No. 8. The factual and legal position will remain the same as for the purpose of section 80HH and, therefore, we direct that for the purpose of section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT, Chandigarh Special Bench decision in the case of Highway Cycle Industries Ltd. v. Asstt. CIT [2002] 74 TTJ 171 . The ld. counsel further pointed out that this issue is also considered and decided by the Bombay High Court in the case of CIT v. Parle Biscuits Ltd. [IT Appeal No. 215 of 2002, dated 23-8-2004]. A copy of the order has been filed. The question No. 2 before the High Court was as under : "Whether on the facts and circumstances of the case and in law, the Hon ble ITAT was justified in holding that income from interest, rent dividend and profit on sale of toothpaste should be included in the eligible profits for working out deduction allowable under section 32AB of the Income-tax Act ?" The question was decided at Paras 4 to 6 of the order, which may be reproduced : "Insofar as question No. 2 is concerned, we find that the controversy stands concluded by the judgment of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT 255 ITR 273 . The Supreme Court in the case of Apollo Tyres Ltd. observed thus : A perusal of section 32AB, as it stood at the relevant time, shows that if an assessee has a total income including income chargeable to tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The ld. counsel for the Revenue did not venture to demonstrate that the business of the assessee falls under the type of business enumerated in sub-clauses ( a ) and ( b ) of section 32AB(2). Accordingly, the Tribunal s view relating to deduction under section 32AB with regard to income from interest, rent, dividend and profit on sale of toothpaste that they fall within the meaning of eligible business cannot be faulted." The ld. counsel, therefore, contended that the issue is fully covered in assessee s favour. The ld. CIT DR supported the orders of the Revenue authorities. 14. After considering the rival submissions, we are of the view that the issue is squarely covered in assessee s favour by the Bombay High Court decision referred to ( supra ). The order of the ld. CIT(A) on this issue is, therefore, reversed and the Assessing Officer is directed to re-compute the deduction allowable under section 32AB after including the relevant items of income in the profits of eligible business. 15. Coming to the controversy reflected in ground No. 10, we find that this issue has been dealt with by the ld. CIT(A) elaborately at pages 25 and 26 of his order. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on export of Naphtha and fuel oil. The ld. CIT(A), for the present assessment year, did not agree with the view adopted by his predecessor in respect of the assessment year 1985-86. He held that petroleum products exported by the assessee can be classified only after the head Mineral Oil and, therefore, the assessee is not entitled to deduction under section 80HHC. The ld. CIT(A) considered the following Bombay High Court decisions : ( i ) Burmah Shell Refineries Ltd. v. G.B. Chand, ITO [1966] 61 ITR 4. ( ii ) CIT v. Caltex (India) Ltd. [1989] 177 ITR 239 . 18. Shri Dastoor, the ld. counsel, forcefully contended before us that the petroleum products which are manufactured and refined by the assessee from out of crude oil cannot be classified as mineral oil. He submitted that mineral oil means crude oil and once the crude oil undergoes several processes of refining, its character completely transforms and it cannot be said that the given products like Naphtha, diesel and fuel oil are in the nature of mineral oil. The ld. counsel invited our attention to certain definitions of some relevant terms contained in dictionaries. To start with, he referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally underground, primarily within the pore spaces of sedimentary rocks and under normal conditions they migrate freely until stopped by a subsurface obstruction or trap. In its liquid and gaseous forms, petroleum is the most important of the primary fossil fuels that supply the bulk of the world s energy requirements." At page 180, petroleum refinery is defined as under : "Petroleum Refining - Crude oil as it is found in nature consists of complex mixtures of compounds containing hydrogen and carbon (hydrocarbons). In the petroleum refining process, useful products, such as gasoline, motor oil, and petrochemicals, are manufactured from crude oil which in general is unsuitable for direct use." He invited our attention to the discussion contained at pages 181 and 182 of the Encyclopaedia Britannica . The ld. counsel for the assessee pointed out that the primary refinery process is fractional distillation, which may be followed by other physical separation methods, such as solvent extraction in which superior lubricating stocks are extracted by means of a solvent. It is also pointed out that the separation processes described in the Encyclopaedia Britannica are based on diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s extracted from refining. It was not a mixture of hydrocarbon and, therefore, it did not fall within the meaning of the expression mineral oil . Shri Dastoor contended before us that the Bombay High Court decision is squarely applicable to the case of the assessee and the end-product cannot be said to be in the nature of mineral oil, for the purposes of section 80HHC. It is, therefore, argued that the Revenue authorities were wholly unjustified in denying the deduction under section 80HHC in respect of profits earned by the assessee by export of petroleum products. 19. Shri Rajendra, the ld. CIT-DR, invited our attention to the order of the ld. CIT(A) and submitted that the Bombay High Court decision in the case of Caltex (India) Ltd. ( supra ) has been duly considered by the ld. CIT(A) together with the Bombay High Court decision in the case of Burmah Shell Refineries Ltd. ( supra ). The ld. CIT-DR contended that the facts of the present case are totally different from the facts of Caltex (India) Ltd. In that case, the assessee blended the crude oil with not less than 18 chemicals and also added dyes, vegetable oil and silicon. The end-product no more remained the mixtur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from coal, shale or other natural sources . From the meaning of the word mineral oil as given in Webster s and Oxford Dictionaries as well as in the technical dictionaries, viz., the Petroleum Dictionary and the Illustrated Petroleum Dictionary , it is clear that the expression mineral oil is wide enough to include both the petroleum in its crude form as well as the products secured or obtained from the crude oil by refining. We have already stated that in the petition the business of the petitioner-company has been given as refining crude oil . The dictionary meaning of the word crude oil in Webster s Dictionary (page 546, Vol. I) is : Crude oil or crude petroleum, n. : petroleum as it occurs naturally, as it comes from an oil well, or after extraneous substances (as contained water, gas and minerals) have been removed. In the Illustrated Petroleum Dictionary and Products Manual - by Petroleum Educational Institute, California - it has been mentioned that crude oil - See Petroleum. Petroleum - Describes crude oil as it comes from the ground in its natural state of when secured from coal, shale and other sources. Its origin is not definitely known. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return and claimed rebate of 35 per cent from tax payable on the ground that it was a company engaged in the manufacture or production of mineral oil . For making provisional assessment under section 141(1), the Assessing Officer enquired into the question whether the refining of crude oil was manufacturing or production of mineral oil, and came to the conclusion that refining crude oil was not manufacturing or processing of mineral oil. The assessee filed writ petition before the High Court. In this context, it was observed by the High Court that for the purpose of making provisional assessment, the Assessing Officer has to proceed on the basis of the return filed by the assessee. The correctness of the return as to the factual position stated in the return has to be accepted for the time being and the assessment should be made on the basis that the facts stated in the return are correct. The Assessing Officer has no jurisdiction to enquire into questions of mixed facts and law. It was, therefore, observed by the High Court that the Assessing Officer acted in excess of his jurisdiction. It was, for this limited purpose, the ld. counsel argued that the High Court went into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of section 80HHC stipulates that this section does not apply to the following goods or merchandise : i. Mineral Oil. ii. Minerals and Ores (other than processed minerals and ores specified in the 12th Schedule. From the above statutory provisions, it becomes clear that deduction under section 80HHC is not available to an assessee who is engaged in the business of export of mineral oil . The moot question is as to whether the petroleum products manufactured by the assessee, namely, Naptha, Diesel and Fuel oil fall under the expression mineral oil . For the purposes of section 80HHC, the expression of mineral oil has not been defined. Therefore, this expression has to be interpreted and understood in the light of dictionary definitions and the observations made by the Bombay High Court in the two cases which have been referred to in the order of the ld. CIT(A) and also relied upon by both the sides before us. The dictionary definitions with which we have been assisted by the ld. counsel for the assessee, in our view, do not in any way conclusively indicate that the refined petroleum products are not included in the expression mineral oil . These definitions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineral origin, i.e., within the viscosity limit recommended for oil (as petroleum, shale oil or any oil obtained from them by refining), especially the liquid petroleum. The Oxford English dictionary states that mineral oil is a general name for petroleum and various oils distilled from it. In Petroleum Dictionary by Lalia Phipps Boone, the meaning of the phrase mineral oil is stated to be as under : i. Crude petroleum and its products. ii. Liquid petroleum. The Bombay High Court also referred to the meaning of mineral oil as given in the Illustrated Petroleum Dictionary and Products Manual - compiled and edited by the editorial staff of the Petroleum Educational Institute. This meaning reads as under : "Mineral oil - Petroleum as it comes from the ground is frequently called mineral oil because it comes from a mineral surrounding; also to distinguish it from oil secured from vegetable and animal sources. It may refer to (1) crude oil coming naturally from the ground or secured from coal, shale or any other natural source; (2) any one of the many products secured from the crude oil or secured from coal, shale or other natural sources." After considering these v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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