Commissioner Of Income Taxchennai v. M/S.yak Granite Industries P Ltdchennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.6.2007 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.299 of 2004 Commissioner of Income TaxChennai .. Appellant Vs M/s.Yak Granite Industries P LtdChennai .. Respondent Appeals under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'C' Bench dated25.7.2003 made in ITA No.721/Mds/1994 for the assessment year 1990-91against the order of the Commissioner of Income Tax (Appeals)IV Madras 600034 dated 27.12.1993 made in ITA No.574/92-93 against the order of theAsst. Commissioner of Income Tax, Comp.Cir.IV (5), Madras-6 in Pan/GirNo.47-055-CY-4692 dated.28.1.1993. For Appellant For Respondent :Mrs.Pushya SitaramanSr.Standing Counsel for I.T.:Mr.M.P.Senthilkumar J U D G M E N T(Delivered by P.D.DINAKARAN,J.) The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal dated 25.7.2003 made in ITA No.721/Mds/1994raising the following substantial question of law: https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances of the case, the Tribunalwas right in holding that the benefit of Section 80HHC isavailable for export of granites that were cut and polished?" 2.The assessee is engaged in excavating granites and cutting theminto pieces, polishing them and then exporting them to foreign country.The assessee claimed that this process of cutting and polishing ismanufacturing activity that has brought the finished product from the rawmaterials excavated from the mines. However, the Assessing Officerdisallowed the deduction claimed by the assessee under Section 80HHC ofthe Act on the ground that the assessee's activity of excavation, cuttingand polishing the granites does not amount to manufacture. The appealpreferred by the assessee against the above order was dismissed by theCommissioner of Income Tax (Appeals). On further appeal, the Tribunalallowed the appeal of the assessee and held that the processing done onthe granite like sizing and polishing etc. constitute manufacture. Hence,the present appeal. 3. Heard both sides. It is fairly conceded on behalf of learnedcounsel for the appellant and the assessee that the question of law raisedin this appeal is answered in favour of the Revenue by the decision in GemGranites Vs. Commissioner of Income-tax [2004] 271 ITR 322. 4. The Apex Court in Gem Granites Vs. Commissioner of Income-tax[2004] 271 ITR 322, held that :"There are no words of restriction in section 80HHC(2)(b) of theIncome-tax Act, 1961, before amendment in 1991, which qualify theword “mineral” and it would be reasonable to assume that in theabsence of such limitation, the word must be read to include allkinds of minerals, in all forms, i.e., whether subjected to anyprocess or not, as long as it continued to retain thecharacteristics of the mineral. Granite is covered by the word“minerals” in the exclusionary clause (b) of sub-section (2) ofsection 80HHC. For the unamended section 80HHC(2)(b) cut andpolished granite would also be a mineral, and export thereof wouldnot qualify for the special deduction under that section. The introduction of the phrase “other than” in clause (b) of sub-section (2) of section 80HHC in 1991 indicates the carving out of aspecific class from the generic class of “minerals and ores”. Thismeans that, were it not for the exception, the specified processedminerals and ores would have been covered by the words “mineralsand ores”. It also indicates that, after the 1991 amendment, onlyminerals and ores subjected to the process of cutting and polishingwould be entitled to the benefit of section 80HHC, meaning therebythat all other species of minerals and ores would continue to becovered by the general exclusion applicable to the generic class. The introduction of the phrase “other than” in clause (b) of sub-section (2) of section 80HHC in 1991 indicates the carving out of aspecific class from the generic class of “minerals and ores”. Thismeans that, were it not for the exception, the specified processedminerals and ores would have been covered by the words “mineralsand ores”. It also indicates that, after the 1991 amendment, onlyminerals and ores subjected to the process of cutting and polishingwould be entitled to the benefit of section 80HHC, meaning therebythat all other species of minerals and ores would continue to becovered by the general exclusion applicable to the generic class. The benefit of section 80HHC has been extended by the 1991amendment to a specific kind of mineral and was introduced for thefirst time in 1991. The assessee which exported granite after being cut and polishedwas not entitled to claim the deduction under section 80HHC of theIncome-tax Act, 1961, in respect of the profits from the exportbusiness for the assessment year 1987-88." (emphasis supplied) 5. By applying the ratio of the aforementioned judgment to the factsof this case, we hold that the export of granite, whether cut into blocksand polished or not, is not entitled to deduction under Section 80HHC forthe period prior to 1[st] April, 1991. In the result, this appeal is allowed answering the question of lawin favour of the Revenue and against the assessee. sasi Sd/-Asst.Registrar /true copy/ Sub Asst.Registrar To: 1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai 2. The Commissioner of Income-tax (Appeals)-IV Madras 3. The Commissioner of Income-tax, Chennai. 4. The Asst. Commissioner of Income Tax Comp.Cir. IV(5), Madras-6. +1 cc to M/s.Pushya Sitaraman, Advocate Sr.No.35681. GG(CO)dcp/25.06.07 Tax Case (Appeal) No.299 of 2004