M/S.magam Inc., B v. The Commissioner Of Income Tax Tamil Nadu Chennai-600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.07.2006 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARAN ANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A) Nos.196 to 198 of 2003 M/s.Magam Inc.,B-254, 50[th] StreetChennai – 600 083. .. Appellantin all Tcs.Vs The Commissioner of Income TaxTamil NaduChennai-600 034. .. Respondentin all Tcs. Appeals under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'C' Bench dated4.9.2001 made in ITA Nos.2871, 2872 and 2724/Mds/1992 for the assessmentyears 1987-88 and 1989-90 against the Order of the Commissioner of IncomeTax (Appeals) VI, Madras 600 034 dated 24.8.1992 and made in IT AppealNo.184/92-93/City Ward II and I.T.Appeal No.185/92-93/City Ward II againstthe Order of the Income Tax Officer, City Ward II(6) Madras 6 dated27.4.92 and made in PA.No./GIR No.28315-M. For Appellant:Mr.Philip GeorgeFor Respondent:Mrs.Pushya SitaramanSr.Standing Counsel for I.T. J U D G M E N T (Delivered by P.D.DINAKARAN,J.) The above tax case appeals are directed against the order of theIncome-tax Appellate Tribunal dated 4.9.2001 made in ITA Nos.2871, 2872and 2724/Mds/1992. 2. The assessee is a registered partnership firm carrying on thebusiness of blasting and excavation of Granite and then cutting andpolishing them into blocks known in the industry as dimensional blocks.The main submission of the assessee before the Commissioner of Income Tax https://hcservices.ecourts.gov.in/hcservices/ (Appeals) was that granite was not to be considered as a mineral andtherefore, the relief under section 80 HHC was allowable. TheCommissioner agreed with the appellant and allowed the appeals. On appealby 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 theIncome Tax Appellate Tribunal was right in law in holding that theprofits derived from the export of the dimensional granite blocks,being value added marketable commodity, would not be entitled todeduction u/s. 80HHC of the Income Tax Act, 1961? (ii) Whether on the facts and in the circumstances of the case theIncome Tax Appellate Tribunal was right in law in holding that theAppellant had exported only granite without appreciating orconsidering the submissions made before it that on conversion intodimensional blocks the original character of minerals was no longerexisting, which was based on the various decisions placed beforeit? and (iii) Whether on the facts and in the circumstances of the case,the Income Tax Appellate Tribunal was right in law in not followingthe decision of the self same Income Tax Appellate Tribunal in theappellant's own case for the assessment year 1988-89 which wasplaced on its files?" 3. The learned counsel for the appellant assessee fairly submits thatthe questions of law raised in these appeals are covered in favour of theRevenue by the decisions in: (i) Commissioner of Income-tax Vs. Pooshya Exports P. Ltd., [2003]262 ITR 417; and (ii) Gem Granites Vs. Commissioner of Income-tax [2004] 271 ITR 322. (iii) Whether on the facts and in the circumstances of the case,the Income Tax Appellate Tribunal was right in law in not followingthe decision of the self same Income Tax Appellate Tribunal in theappellant's own case for the assessment year 1988-89 which wasplaced on its files?" 3. The learned counsel for the appellant assessee fairly submits thatthe questions of law raised in these appeals are covered in favour of theRevenue by the decisions in: (i) Commissioner of Income-tax Vs. Pooshya Exports P. Ltd., [2003]262 ITR 417; and (ii) Gem Granites Vs. Commissioner of Income-tax [2004] 271 ITR 322. 4. This Court in Commissioner of Income-tax Vs. Pooshya Exports P.Ltd., [2003] 262 ITR 417, after referring the relevant provision of thestatute, i.e., Section 80HHC of the Income-tax Act, held that, by virtueof the expression “the export of any goods or merchandise to which thissection applies” employed in Section 80HHC and by virtue of sub-section 2(b)(ii), which specifically denied the benefit of the section to export ofgranite (mineral), the benefit under section 80HHC is not available to theassessee; that by the Amendment Act 2 of 1991, an exception has beencarved out to the specific provision which excluded, rather denied thebenefit conferred under section 80HHC to export of minerals (granite);that the amendment brought by the Finance (No. 2) Act of 1991 to Section80HHC is only prospective and effective from April 1, 1991; and that thestatutory provision is very clear in the sense that section 80HHC is notapplicable to the export of granite. 5. That apart, the Apex Court in Gem Granites Vs. Commissioner ofIncome-tax [2004] 271 ITR 322, held that : "There are no words of restriction which qualify the word“minerals” and it would be reasonable to assume that in the absenceof any such limitation, the word must be read to include all kindsof minerals in all its forms, i.e., whether subjected to anyprocess or not as long as it continued to retain thecharacteristics of the mineral. To hold that the word “minerals”never included processed minerals would require our reading wordsof limitation into an otherwise clear and unambiguous statutoryprovision. There is no dispute that granite is covered by the word“minerals” in the exclusionary clause (b) of sub-section (2) ofsection 80HHC. It would follow that for the unamended section 80HHC(2)(b) cut and polished granite would also be a mineral. "There are no words of restriction which qualify the word“minerals” and it would be reasonable to assume that in the absenceof any such limitation, the word must be read to include all kindsof minerals in all its forms, i.e., whether subjected to anyprocess or not as long as it continued to retain thecharacteristics of the mineral. To hold that the word “minerals”never included processed minerals would require our reading wordsof limitation into an otherwise clear and unambiguous statutoryprovision. There is no dispute that granite is covered by the word“minerals” in the exclusionary clause (b) of sub-section (2) ofsection 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 sub-section (2) of section 80HHC in 1991 in our opinion,indicates thecarving out of a specific class from the generic class of “mineralsand ores”. This means, that were it not for the exception, thespecified processed minerals and ores would have been covered bythe words “minerals and ores”. It also indicates that only theminerals and ores subjected to the process of cutting and polishingwould be entitled to the benefit of section 80HHC meaning therebythat all other species of processed minerals and ores wouldcontinue to be covered by the general exclusion applicable to thegeneric class. The 1991 amendment of section 80HHC thusconclusively demonstrates that the words “minerals and ores” mustbe construed widely and in an unrestricted manner. As has been heldin Municipal Committee v. Manilal Manekji P. Ltd., AIR 1967 SC 1201; [1967] 2 SCR 100 and Pappu Sweets and Biscuits v. Commissioner ofTrade Tax, U. P. [1998] 7 SCC 228 ; [1998] 111 STC 425 (SC),subsequent legislation may be looked into to fix the properinterpretation to be put on the statutory provisions as it stoodearlier. The benefit of section 80HHC has been extended by theamendment to a specific kind of mineral and was introduced for thefirst time in 1991. If we were to hold that the word “minerals” insub-section (2)(b) never included processed minerals then the 1991amendment excepting processed minerals from the exclusionary effectof the sub-section would be rendered meaningless and an exercise infutility." 6. Following the decisions referred supra, this Court, by judgmentdated 21.2.2006 made in T.C.No.55 of 2000, held that the profits derivedfrom the export of the dimensional granite blocks, being value addedmarketable commodity, would not be entitled to deduction under Section80HHC of the Income Tax Act. 7. Drawing support from the decisions referred supra, we are of theconsidered view, that the amendment brought by the Finance (No. 2) Act of1991 to Section 80HHC of the Income Tax Act is only prospective andeffective from April 1, 1991, and for the assessment years 1987-88 and1989-90 under consideration, the statutory provision is very clear in thesense that Section 80HHC of the Income Tax Act is not applicable to theexport of granite. In the result, these appeals are dismissed, the questions of law areanswered in affirmative and in favour of the Revenue. Sd/-Asst. Registrar.Sub Asst. Registrar. /true copy/ sasiTo: 1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, Besant Nagar, Chennai.2. The Commissioner of Income-tax (Appeals)-VI Madras 600 034.3. The Commissioner of Income-tax, Tamilnadu-III, Madras.4. The Income Tax Officer, City Ward II(6), Madras.+ 1 CC To Mr. Philip George, Advocate SR NO. 31339+ 1 CC To Mrs.Pushya Sitaraman, Advocate SR NO.31141 ng(co)gp/8.8. T.C.Nos.196 to 198 of 200317.7.2006