Back
2011 Supreme(Cal) 1080
High Court Of Calcutta
B.Bhattacharya, Sambuddha Chakrabarti, JJ.
Jai Mica Supply Co. Pvt. Ltd – Appellant
Versus
Commissioner Of Income-Tax – Respondent
I.T.A. No.217 of 2003
Decided on : Aug 12, 2011
J.P.Khaitan, Md.Nizamuddin
Processed minerals exported by the assessee were not covered under Section 80HHC of the Income-tax Act, 1961 for the relevant assessment year and the Tribunal was justified in upholding the order passed by the Commissioner of Income Tax under Section 263 withdrawing the deduction allowed in the assessment.
Headnote:
INCOME TAX - Deduction under Section 80HHC - Processed Minerals - Export of Fabricated Mica Products - Whether Mica Products Excluded from Section 80HHC - Applicability of Section 263 - Whether Tribunal Justified in Upholding Order under Section 263.
Fact of the Case:
The assessee, a private limited company, exported fabricated mica electronic components and claimed deduction under Section 80HHC of the Income-tax Act, 1961. The Assessing Officer allowed the deduction, but the Commissioner of Income-tax issued a notice proposing to revise the assessment by directing the Assessing Officer to withdraw the deduction. The assessee filed an appeal before the Income-tax Appellate Tribunal, which dismissed the appeal. The assessee filed an appeal before the High Court.
Finding of the Court:
The High Court held that the products exported by the assessee were processed minerals within the meaning of the Twelfth Schedule and that the appellant's item of export came within item No.(v) of the Twelfth Schedule. The Court further held that the goods in question are really processed mineral as would appear from explanation given to the said Schedule. The Court also held that the Assessing Officer gave the benefit of Section 80HHC of the Act notwithstanding the fact that the legislature had excluded the operation of Section 80HHC in respect of goods and merchandise of mineral items processed by the appellant for the assessment year in question. Thus, the decision to give benefit though law did not permit grant of such benefit is a grave error on the part of the Assessing Officer which has resulted in the loss of revenue and consequently, it was a fit case for invoking the jurisdiction under Section 263 of the Act.
Issues: 1. Whether the products exported by the assessee were excluded from the purview of Section 80HHC of the Income-tax Act, 1961 for the relevant assessment year. 2. Whether the Tribunal was justified in upholding the order passed by the Commissioner of Income Tax under Section 263 withdrawing the deduction allowed in the assessment. 3. Whether the Tribunal was justified in law in not holding that commissioner is bound by the circular dated July 27, 1994 issued by the Central Board of Direct Taxes and was incompetent to proceed under Section 263. 4. Whether the Tribunal was justified in law in upholding the order passed by the Commissioner under Section 263 when the Assessing Officer had taken a view which was not unsustainable in law. 5. Whether the Tribunal was justified in law in seeking to uphold the order under Section 263 on a new ground neither taken in the notice issued by the Commissioner or the order passed by him namely, alleged lack of enquiry/verification in making the assessment.
Ratio Decidendi: 1. The products exported by the assessee were processed minerals within the meaning of the Twelfth Schedule and that the appellant's item of export came within item No.(v) of the Twelfth Schedule. 2. The goods in question are really processed mineral as would appear from explanation given to the said Schedule. 3. The Assessing Officer gave the benefit of Section 80HHC of the Act notwithstanding the fact that the legislature had excluded the operation of Section 80HHC in respect of goods and merchandise of mineral items processed by the appellant for the assessment year in question. 4. The decision to give benefit though law did not permit grant of such benefit is a grave error on the part of the Assessing Officer which has resulted in the loss of revenue and consequently, it was a fit case for invoking the jurisdiction under Section 263 of the Act.
Final Decision: The appeal was dismissed by answering all the five points formulated in this appeal in the affirmative and against the assessee.
Bhaskar Bhattacharya, J.
1. THIS appeal under Section 260A of the Income-tax Act, 1961 ("Act") is at the instance of an assessee and is directed against an order dated April 7, 2003 passed by the Income-tax Appellate Tribunal, "B" Bench, Kolkata in ITA No.698/Cal/1995 for the Assessment Year 1990-91 and thereby dismissing the appeal filed by the appellant.
2. BEING dissatisfied, the assessee has come up with the present appeal. The facts giving rise to filing of the present appeal may be summarized thus:
a) The appellant is a private liability company within the meaning of the Companies Act, 1956 and is regularly assessed to tax under the Income-tax Act, 1961 and the present appeal arises out of the assessment of the appellant for the Assessment Year 1990-91 for which the relevant previous year was the financial year ending on March 31, 1990.
b) The appellant carries on business of manufacturing various Mica products from raw mica obtained from mines.
c) Mica obtained from the mines is subjected to several operations, such as, disintegration, washing, drying and removal of the alien and scissors to obtain specific sizes. Further process is undertaken to differentiate between different qualities and to obtain different thickness.
d) The fabricated mica parts, depending upon the requirement of the buyers, are coated with silver paste by the process of screen printing. The printing machine is also filled with a small furnace for the purpose of drying the Silvered Mica parts. Such silvered mica parts are subjected to further drying in a bigger furnace at high temperature.
e) The appellant also manufactures Mica flakes by pulverizing selected mica pieces. Flakes are manufactured in different mesh specifications depending upon the buyers" requirements and are used in the manufacture of pearlescent pigment.
f) According to the appellant, the fabricated Mica parts, silvered mica parts, micanite sheets and mica flakes manufactured out of processed mica are treated as distinct commercial commodities different from the raw mica obtained from the mines.
g) During the material period, the appellant exported fabricated mica electronic components pursuant to the orders received from foreign customers. The appellant was registered with the Engineering Export Promotion Council as a manufacturer and exporter of fabricated mica parts.
h) In respect of the fabricated mica electronic components exported by it, the appellant claimed deduction under Section 80HHC of the Act and in the assessment made under Section 143(3) of the Act for the Assessment Year 1990-91, the Assessing Officer allowed the claim of the appellant under Section 80HHC in respect of the fabricated mica electronic components exported to other countries.
i) The Commissioner of Income-tax, however, issued a notice dated December 21, 1994 proposing to revise the said assessment by directing the Assessing Officer to withdraw the deduction allowed under Section 80HHC, since according to him, the processed minerals endorse were excluded from the purview of Section 80HHC for the Assessment Year 1990-91.
j) The appellant filed detailed reply along with various enclosures thereby contending that the appellant exported mica products which were held as distinct commercial commodities different from the mineral mica obtained from the mines.
k) The Commissioner of Income-tax, however, by an order dated January 31, 1995 held that processed mica was not covered by Section 80HHC prior to the Assessment Year 1991-92 and directed the Assessing Officer to withdraw the deduction granted under the said section.
l) BEING dissatisfied, the appellant preferred an appeal before the Income-tax Appellate Tribunal, where there was a difference of opinion between the members who heard the appellant’s appeal. The Accountant Member was of the view that the appellant was entitled to deduction under Section 80HHC as valued products exported by the appellant were not mineral as such. The learned Judicial
