TMI Blog2003 (10) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), challenging the correctness of the order dated September 22, 2000, made in I.T.A. No. 1582/Bang of 1992 by the Income-tax Appellate Tribunal, Bangalore Bench (hereinafter referred to as "the Tribunal"). The assessment year which is the subject matter of dispute in the said appeal relates to the year 1989-90. In I.T.R.C. Nos. 23 and 24 of 1997, the Tribunal pursuant to the order made by this court calling for reference referred the two questions to this court as arising out of an order dated December I, 1995, made in I.T.A. No. 958/Bang of 1989 for the assessment year 1984-85. They are as follows: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that granite would fall under the category of 'mineral' in the context of clause (b)(ii) of sub-section (2) of section 80HHC? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the extraction of granite was a manufacturing activity and, therefore, the assessee was entitled to investment allowance under section 32A on the plant and machinery held by it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order made two submissions. Firstly, they submitted that the conclusion reached by the Tribunal that the benefit of sub-section (1) of section 80HHC of the Act would not be available to the assessees in view of the provisions contained in sub-section (2)(b)(ii) of section 80HHC as the goods exported by the assessees were minerals is totally erroneous in law. According to learned counsel, since the goods they have exported are cut and polished minerals, the same ceased to be a "mineral" within the meaning of section 80HHC(2)(b)(ii) of the Act. In support of their submission they referred to us the circular dated May 22, 1984, issued by the Central Government of Direct Taxes (hereinafter referred to as "the CBDT"), wherein the Central Board of Direct Taxes had clarified that the export of cut and polished diamonds cannot be construed as "mineral" to deprive the benefit granted under sub-section (1) of section 80HHC. They also pointed out that the Division Bench of this court in the case CIT v. Mysore Minerals Ltd. (No. 2) [2001] 250 ITR 728 relying upon the said Board Circular dated May 22, 1984, has taken the view that the export of cut and polished granites would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied to granite would deprive the quality of rough minerals from the dimensional blocks of granite, which was a value added marketable commodity; therefore, the profits derived from the export of granite dimensional blocks would be eligible for deduction under section 80HHC of the Act. As we have already noted, there is nothing on record to indicate that what the assessee exports is such value added granite so that, even assuming that the said circular is explanatory and can, therefore, relate back to the year in question, the assessee cannot derive any assistance therefrom." It is their submission that the observation of the Supreme Court would clearly indicate that if granite is cut and polished, it will be outside the purview of "mineral". However, Sri Sheshachala, learned counsel appearing for the Department, while strongly countering the submissions of Sri Prasad and Sri Sarangan, firstly, pointed out that since the very contention having been considered and repelled by this court in the case of Muddeereswara Mining Industries and Stonecraft Enterprises v. CIT [1993] 204 ITR 550 which is affirmed by the Supreme Court in the case of Stonecraft [1999] 237 ITR 131, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. [2003] 262 ITR 417 and referred to us page 425 of the judgment wherein the Division Bench has expressed its inability to agree with the view expressed by this court. It is also pointed out by him that the assessees are not entitled to rely upon the circular dated November 1, 1995, issued by the Central Board of Direct Taxes in support of their claim; and also the judgment of God Granites [1999] 240 ITR 343 (Karn). It is pointed out that this court in the case of God Granites [1999] 240 ITR 343 has only taken the view that the benefit of the circular dated November 1, 1995, would be available for the assessment years 1991-92 onwards; and a similar view is also taken by the Madras High Court in the case of Pooshya Exports P. Ltd. [2003] 262 ITR 417. We have given our careful consideration to the contentions thoughfully advanced by learned counsel appearing for the assessees which was with equal wisdom countered by counsel for the Revenue. Now, we will proceed to consider the first contention advanced on behalf of the asses sees that cut and polished granites are not minerals. However, before we do that, we think that it is useful to refer to section 80HHC(2)(b)(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept mineral oils." In the case of Muddeereswara Mining Industries [1993] 204 ITR 550, the Division Bench of this court has at page 564 observed that a mineral is a chemical composition and compound occurring in nature and having a definite chemical composition and properties. Chambers' 21st Century Dictionary defines "mineral" as follows: Chambers 21st Century Dictionary: "mineral noun 1 technical a naturally occurring substance that is inorganic, usually crystalline, and has characteristic physical and chemical properties by which it may be identified. 2 loosely any substance obtained by mining, including fossil fuels (e.g., coal, natural gas or petroleum) although they are organic. 3 any inorganic substance, i.e., one that is neither animal nor vegetable. 4 adj. belonging or relating to the nature of a mineral; containing minerals." The Law Lexicon defines: "Mineral. Anything that grows in mines, and contain metals. (Tomlins Law Dic.). The term 'minerals' includes all such bodies of mineral substances, lying together in seams, beds, or strata as are commonly worked for profit and have a value independent of the surface of the land, whether extracted from a mine or a q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganic substances forming part of the soil; these excluded goods indicate that they form the natural wealth of the country; these' goods' are not the produce of any productive activity, but are extracted or obtained from 'mother earth'." Further, in the case of State of Mysore v. Swamy Satyanand Saraswati, AIR 1971 SC 1569, 1575 the Supreme Court took the view that granite is also a "mineral". At paragraph 13 of the said judgment, the Supreme Court has observed as follows: "13. . . . It is not in our view possible to hold otherwise than that granite is a mineral. According to Halsbury's Laws of England: 'There is no general definition of the word 'mineral'. The word is susceptible of expansion or limitation in meaning according to the intention with which it is used;... It is a question of fact whether in a particular case a substance is a mineral or not... The test of what is a mineral is what at the date of the instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among landowners, and in case of conflict this meaning must prevail over the purely scientific meaning. In article 675 at page 322 the learned authors surnrn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sociis is satisfied and it is unnecessary to narrow down the scope of the term 'mineral'." The above observation clearly indicates that a broader meaning to the word "mineral" is required to be given by the courts and there is no justification to impose a restricted meaning. We are in respectiful agreement with the said view expressed by this court. If the intention of Parliament was to exclude cut and polished granite from the rigour of sub-section (2)(b)(ii) of the Act, nothing would have been easier than to state so in the provision itself. Admittedly, that has not been done. On the contrary, by means of an amendment made to the section by means of the Finance (No.2) Act of 1991, minerals which are cut and polished are excluded from the purview of sub-section (2)(b)(ii) of section 80HHC of the Act. Therefore, from the plain reading of the word "mineral" prior to the amendment made in the year 1991, we are of the view that even if the cutting or polishing of granite is made, the assessee would not be entitled for the benefit provided under section 80HHC of the Act. The view we have taken above gets support from the decision of this court in the case of Muddeereswara Mining I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided expressly or by necessary implication: CIT v. Isthmian Steamship Lines [1951] 20 ITR 572 (SC) and Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC). On that principle, it is abundantly clear that when an assessment for the assessment year 1960-61 is to be made and section 24(2) is invoked, it is section 24(2) as in force in that assessment year which has to be applied. That is the provision as amended by the Finance (No.2) Act, 1957. There is no question of the assessee possessing any vested right under the law as it stood before the amendment. The assessment for one assessment year cannot, in the absence of a contrary provision, be affected by the law in force in another assessment year. A right claimed by an assessee under the law in force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year. Therefore, inasmuch as the provisions of section 24(2), as amended in 1957, govern the assessment for the assessment year 1960-61, the High Court is right in affirming that the unabsorbed loss of Rs. 15,50,189 of the assessment year 195051 cannot be carried forward for more than eight years, and consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80HHC of the Act. In the said decision at page 730 it is observed as follows: "We proceed to answer the reframed question as follows: The assessee had claimed deduction under section 80HHC on the processed articles of granite like slabs, monuments, tiles, etc., only. The finished products are clearly distinguishable from the raw materials. In the Board circular dated May 22, 1984, it has been held that the export of cut and polished granites would be qualified for the relief of deductions under section 80HHC of the Act. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to classify the exports into exports of cut and polished items and to allow the relief under section 80HHC of the Act, accordingly. The assessee had been denied deduction on the export of raw granites. The circular of the Board is binding on the authorities under the Act and they cannot take a plea contrary to the circular issued by the Board." With respect, we find it difficult to subscribe to the view expressed by this court in the said decision. In the said decision, this court proceeded on the basis that the circular applies to granite also. This court did not notice that the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circular was issued in respect of cut and polished granites. The Madras High Court in the case of Pooshya Exports P. Ltd. [2003] 262 ITR 417 relied upon by Sri Sheshachala, has differed from the view taken by this court and the said view supports the view we have taken above. Further, it is also relevant to point out that if Parliament has understood that cut and polished minerals including granite was entitled for the benefit of section 80HHC even prior to the amendment of sub-section (2)(b)(ii) of the Act by means of the Finance (No.2) Act of 1991, it is reasonable to infer that Parliament would have made the amendment retrospective in operation. Admittedly, the same has not been done. Therefore, the only way to understand the amendment made to section 80HHC(2)(b)(ii) is to understand that it is only from the date of coming into force of the said provision, that cut and polished granite would be entitled for the benefit of section 80HHC of the Act while all other types of granites are not entitled for the benefit of the said provision. No doubt, Sri Sheshachala has seriously urged that in the instant case, the claim made by the asses sees that the granite exported by them is cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
