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TMI Blog1993 (7) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness expenditure, no argument was addressed on the said question. Hence, we proceed on the basis that we are required to consider only the above two questions which are in substance the same question worded differently. A detailed reference to the facts is unnecessary. Admittedly, the assessee has been exporting granites. The question is whether the income earned from the export of granites is covered by section 80HHC of the Act. There is also no dispute that granite is covered by the terms "goods or merchandise" and, there fore, the business of the assessee in exporting granite would normally be covered by the beneficial provisions of section 80HHC of the Act. The Revenue has relied on sub-section (2)(b) of section 80HHC to contend that granite is a mineral and, therefore, the main provision of the said section is not attracted. As per clause (b) of sub-section (2), the main section is not applicable to "minerals and ores". We are concerned here with the assessment years 1985-86, 1987-88 and 1988-89. The Appellate Tribunal relied upon its order made in I.T.A. Nos. 326 and 327 of 1990, wherein the Tribunal had held that "granite" is a mineral and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineral has to be understood with reference to its similarity to another subject that would come within the term "ore". There can be no dispute about the proposition that the terms used in a fiscal legislation describing the subjects of taxation are to be normally understood in their popular sense unless the law itself indicates a different approach. Scientific and technical meanings are to be attributed to those words only when the context requires such meanings to be given. The normal rule is to give that meaning which the persons engaged in dealing with that subject-matter, attribute to that term, describing the subject. It is also true that a beneficial provision in a fiscal statute should be liberally construed to advance the purpose behind the legislation. But, in many of the cases, the problem is to find out the real purpose behind a particular provision. The contention has mainly two aspects-(i) the scope of the rule of noscitur a sociis (ii) to what extent the relevant provisions of section 80HHC are beneficial. As to the rule of noscitur a sociis, the Supreme Court in State of Bombay v. Hospital Mazdoor Sabha [1959-60] 17 FJR 423 ; AIR 1960 SC 610 observed, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980] 45 STC 58, the Supreme Court was considering the scope of the term "sanitary fittings" in entry 26A of the Schedule to the Kerala General Sales Tax Act. The question was whether G.I. Pipes came within the purview of "water supply and sanitary fittings". The Supreme Court observed as follows (at page 62) "The entire expression 'water supply and sanitary fittings' is one single expression and the words 'water supply ... fittings' must receive colour from the immediately following words 'sanitary fittings'. We are, therefore, of the view that the expression 'water supply . . . fittings' in the context in which it occurs means such pipes or materials as are meant for use for supply of water to or in lavatories, urinals or bath-rooms of private houses or public buildings and they do not include heavy pipes which are laid underground as mains for carrying water supply from one area or place to another." The Supreme Court took into consideration the context in which the terms were used, to arrive at the true scope of the relevant words and, having regard to the context, it was held that the words used in the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued in the context of a notification granting concession to small scale factories which manufacture paper with unconventional raw materials, the Supreme Court found no reason to restrict the scope of the concession. After referring to the maxim "noscitur a sociis" the court observed at page 762 thus: "We entirely agree that these maxims and precedents are not to be mechanically applied ; they are of assistance only in so far as they furnish guidance by compendiously summing up principles based on rules of common sense and logic." "Noscitur a sociis", as Crawford puts it, is like other principles of construction, to be used only as an instrumentality for determining the intent of the Legislature where it is in doubt. Nowhere the principle of construction states that the mere fact that two words are used as associated words, this rule should be applied to cut down the meaning of general word, especially where the association created by the Legislature may be for more than one reason and there may be several common characteristics in the two subjects described by the two words ; in such a case, a search has to be made to find out the real reason fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a situation, in the absence of any strong statutory indication to the contra, the court cannot pick one provision to dominate over the other to apply the rule of beneficial construction. The golden rule of harmonious construction is the best rule to be selected in such a situation. Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC) was cited by Sri Sarangan to contend that a beneficial provision in a taxing statute should be broadly construed. The Supreme Court was construing section 15C of the Indian Income- tax Act, 1922. Since it was a provision directed towards encouraging industrialisation, the provision was liberally construed. Learned counsel relied on the observations found at page 193 to the following effect : "The limited question is whether the assessee which has been found by the Tribunal to be a new company could be denied the benefit as visualised in section 15C(1) because of the operation of clause (i) of sub section (2). It is a restrictive clause. It denies the benefit which is other wise available in sub-section (1). A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. In Broach Distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court had also adopted a similar approach of construing beneficial provision liberally in CIT v. Mahant Oil Industries Pvt. Ltd. [1992] 193 ITR 620 (Kar), at page 622, the Bench observed : "Since section 32A is a beneficial provision, it should receive liberal construction to effectuate the basic idea behind the provision. Therefore, there is no reason to restrict the meaning of the term 'plant' or 'machinery' used in section 32A of the Act." However, it should be noted that, earlier, the Bench also pointed out that the meaning attributable to a term will have to be understood with reference to the context and the purpose for which a particular provision is enacted. In CIT v. Strawboard Manufacturing Co. Ltd. [1989] 177 ITR 431 (SC) the term "paper and pulp" was held as inclusive of strawboard. The Supreme Court held that the Schedule in the Act which refers to "paper and pulp" intended to refer to the paper and pulp industry and, therefore, the term has to be broadly construed and, in this regard, the Supreme Court referred to the Industries (Development and Regulation) Act, wherein the expression "paper and pulp" include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broadly the class of goods which are not to be considered as privileged for tax relief. From the general and broad class of "goods and merchandise", two or three classes of goods are excluded by the statute ; this exclusion is done not by any detailed catalogue or enumeration of goods for exclusion, but by reference to the particular descriptions of the class to which they belonged. There is one common quality that runs through this class of goods excluded from the main beneficial provision. These goods, now, have the common characteristic of being natural inorganic substances forming part of the soil ; these excluded goods indicate that they form the natural wealth of the country ; these "goods" are not the product of any productive activity, but are extracted or obtained from "mother earth". Therefore, the question is whether the broad meaning available to the term "mineral" should be ignored in preference to a narrower meaning, if any. Contextually, there is nothing to indicate that Parliament intended to confine the term "mineral" to a limited class of goods ; in fact, the present scheme of sub-section (2)(b) indicates that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scientifically or technologically. But the analogous meaning is not con fined to this limited sphere of science and technology. Even in the broader sense of being the natural wealth obtainable from the earth, both terms are analogous. Therefore, there is no occasion to restrict the meaning of the word "mineral" by finding out a narrower meaning derived from its companionship of the term "ore". The doctrine of "noscitur a sociis" as sought to be projected by Sri Sarangan to the instant case cannot be applied at all. There are several rules governing the construction of the provisions found in a fiscal legislation. The court has to select the most relevant principle applicable to the particular legislation to aid the understanding of the meaning of the particular provision. A few more decisions cited at the Bar would show that, normally, the meaning of the term "mineral" has a wider connotation though, in the context of its user in a particular legislation, it may have a narrower meaning. In Kumardhubi Fire Clay and Silica Works Ltd. v. Assistant Director, Tax Credit (Exports) [1980] 123 ITR 899, the Calcutta High Court was considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al mineral or a mineral mixture from which useful substances are obtained. It is also loosely used to designate anything that is mined. In the World Book, Volume 13 at page 566, a chunk of granite is shown as a mineral because it is made of minerals. The term "mineral" is defined as the most common solid material found on the earth and all rocks found on the earth's surface also contain minerals. In Amar Singh Modi Lal v. State of Haryana, AIR 1972 P & H 356, the Full Bench was considering whether brick earth is mineral in the Context of the Mines and Minerals (Regulation and Development) Act, 1957. The Full Bench negatived the contention of the petitioners as to the applicability of the scientific and chemical definition of the word "mineral". After referring to the contention it was observed as follows (at page 363): " I regret my inability to agree. It appears to me too late in the day to abandon the wider and comprehensive connotation which has always been attributed to the word 'mineral' in favour of a narrow and constricted meaning therefor. This is first so because admittedly the word 'mineral' is not a term of art of either ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c substance forming part of the crust of the earth other than the layer of soil which sustains vegetable life . . . Be that as it may, it has been laid down that the word 'minerals' when used in legal document or in an Act of Parliament must be understood in its widest signification, unless there be something in the context or in the nature of the case to control its meaning'." The Full Bench also referred to the American view as to the term "mineral". The above decision was referred to by the Supreme Court in Banarsi Dass Chadha and Bros. v. Lt. Governor, Delhi Administration, AIR 1978 SC 1587. Mr. Sarangan referred to some of the observations made in this decision wherein it was pointed out that the word "mineral" has no fixed but contextual connotation and (at page 1589) : ".....In the context of the Mines and Minerals (Regulation and Development) Act, we have no doubt that the word 'mineral' is of sufficient amplitude to include 'brick-earth'. As already observed by us, if the expression 'minor mineral' as defined in the Act includes 'ordinary clay' and 'ordinary sand', there is no earthly reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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