Magam Inc. vs The Commissioner of Income Tax

P.D. Dinakaran, J.—The above tax case appeals are directed against the order of the Income Tax Appellate Tribunal dated 4.9.2001 made

in ITA Nos. 2871, 2872 and 2724/Mds/1992.

The assessee is a registered partnership firm carrying on the business of blasting and excavation of Granite and then cutting and polishing them

into blocks known in the industry as dimensional blocks. The main submission of the assessee before the Commissioner of Income Tax (Appeals)

was that granite was not to be considered as a mineral and therefore, the relief u/s 80HHC was allowable. The Commissioner agreed with the

appellant and allowed the appeals. On appeal by the Department, the Tribunal held in favour of the Department. Hence, the present appeals raising

the following substantial questions of law:

(i) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that the profits derived

from the export of the dimensional granite blocks, being value added marketable commodity, would not be entitled to deduction u/s. 80HHC of

the Income Tax Act, 1961?

(ii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that the Appellant had

exported only granite without appreciating or considering the submissions made before it that on conversion into dimensional blocks the original

character of minerals was no longer existing, which was based on the various decisions placed before it? and

(iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not following the decision of

the self same Income Tax Appellate Tribunal in the appellant''s own case for the assessment year 1988-89 which was placed on its files?

The learned Counsel for the appellant assessee fairly submits that the questions of law raised in these appeals are covered in favour of the

Revenue by the decisions in:

(i) The Commissioner of Income Tax Vs. Pooshya Exports (P) Ltd., ; and

(ii) Gem Granites Vs. Commissioner of Income Tax, Tamil Nadu, .

This Court in The Commissioner of Income Tax Vs. Pooshya Exports (P) Ltd., , after referring the relevant provision of the statute, i.e., Section

80HHC of the Income Tax Act, held that, by virtue of the expression the export of any goods or merchandise to which this section applies

employed in Section 80HHC and by virtue of Sub-section 2(b)(ii), which specifically denied the benefit of the section to export of granite

(mineral), the benefit u/s 80HHC is not available to the assessee; that by the Amendment Act 2 of 19 91, an exception has been carved out to the

specific provision which excluded, rather denied the benefit conferred u/s 80HHC to export of minerals (granite); that the amendment brought by

the Finance (No. 2) Act of 1991 to Section 80HHC is only prospective and effective from April 1, 1991; and that the statutory provision is very

clear in the sense that Section 80HHC is not applicable to the export of granite.

That apart, the Apex Court in Gem Granites Vs. Commissioner of Income Tax, Tamil Nadu, , held 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. There is no dispute that granite is covered by the word ''minerals'' in the

exclusionary Clause (b) of subsection (2) of Section 80HHC. It would follow that for the unamended Section 80HHC(2)(b) cut and polished

granite would also be a mineral.

The introduction of the phrase ''other than'' in Clause (b) of subsection (2) of Section 80HHC in 1991 in our opinion,indicates the carving out of a

specific class from the generic class of ''minerals and ores''. This means, that were it not for the exception, the specified processed minerals and

ores would have been covered by the words ''minerals and ores''. It also indicates that only the minerals and ores subjected to the process of

cutting and polishing would be entitled to the benefit of Section 80HHC meaning thereby that all other species of processed minerals and ores

would continue to be covered by the general exclusion applicable to the generic class. The 1991 amendment of Section 80HHC thus conclusively

demonstrates that the words minerals and ores must be construed widely and in an unrestricted manner. As has been held in Municipal Committee,

Akot Vs. Manilal Manekji Pvt. Ltd. and Another, and M/s. Pappu Sweets and Biscuits Vs. Commissioner of Trade Tax U.P Lucknow, ,

subsequent legislation may be looked into to fix the proper interpretation to be put on the statutory provisions as it stood earlier. The benefit of

Section 80HHC has been extended by the amendment to a specific kind of mineral and was introduced for the first time in 1991. If we were to

hold that the word ''minerals'' in Sub-section (2)(b) never included processed minerals then the 1991 amendment excepting processed minerals

from the exclusionary effect of the Sub-section would be rendered meaningless and an exercise in futility.

Following the decisions referred supra, this Court, by judgment dated 21.2.2006 made in T.C. No. 55 of 2000, held that the profits derived

from the export of the dimensional granite blocks, being value added marketable commodity, would not be entitled to deduction u/s 80HHC of the

Income Tax Act.

Drawing support from the decisions referred supra, we are of the considered view, that the amendment brought by the Finance (No. 2) Act of

1991 to Section 80HHC of the Income Tax Act is only prospective and effective from April 1, 1991, and for the assessment years 1987-88 and

1989-90 under consideration, the statutory provision is very clear in the sense that Section 80HHC of the Income Tax Act is not applicable to the

export of granite.

In the result, these appeals are dismissed, the questions of law are answered in affirmative and in favour of the Revenue.