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2015 Supreme(Mad) 874
HIGH COURT OF JUDICATURE AT MADRAS
R. SUDHAKAR AND R. KARUPPIAH, JJ.
Commissioner of Income-Tax, Chennai – Appellant
Versus
M/s. Kalpana Agencies, Chennai – Respondent
Tax Case (Appeal) Nos. 2100 to 2102, 2306, 2307, 396 of 2006 & 232 of 2007
Decided On :16-02-2015
For the Petitioner: J. Narayanasamy, Standing Counsel for Income Tax
For the Respondents:R. Vijayaraghavan for M/s. Subbarayar Aiyar Padmanabhan, Advocates.
Cut and polished minerals, subject to processing as defined under the explanation, are eligible for deduction under Section 80HHC.
Headnote:
Tax Case - Deduction under Section 80HHC - 12th Schedule - [Pulverised or micronised—barytes, calcite, steatite, pyrophylite, wollastonite, zircon, bentonite, red or yellow oxide, red or yellow ochre, talc, quartz, feldspar, silica powder, garnet, silliminite, fireclay, ballclay, manganese dioxide ore, etc.] - The court discussed the interpretation of processed minerals and ores specified in the 12th Schedule, particularly focusing on the definition of 'processed' and the eligibility for deduction under Section 80HHC. The court emphasized that cut and polished minerals, subject to processing as defined under the explanation, are eligible for deduction, and held that the restrictive interpretation given by the Assessing Officer was incorrect, as it would render item (x) of the 12th Schedule redundant and meaningless.
Fact of the Case:
The assessee, an exporter of ores, quartz, and feldspar, claimed deduction under Section 80HHC of the Income Tax Act. The Assessing Officer denied the benefit, stating that feldspar should be exported in pulverized and micronised form, which the assessee did not do. The Commissioner of Income Tax (Appeals) and the Tribunal held in favor of the assessee, but the Revenue appealed to the High Court.
Finding of the Court:
The court held that the restrictive interpretation given by the Assessing Officer was incorrect, and cut and polished minerals, subject to processing as defined under the explanation, are eligible for deduction under Section 80HHC. The substantial questions of law were answered in favor of the assessee and against the Revenue.
Issues: Interpretation of processed minerals and ores specified in the 12th Schedule, eligibility for deduction under Section 80HHC, and the correct application of the explanation to the 12th Schedule.
Ratio Decidendi: Cut and polished minerals, subject to processing as defined under the explanation, are eligible for deduction under Section 80HHC. The restrictive interpretation given by the Assessing Officer was incorrect, as it would render item (x) of the 12th Schedule redundant and meaningless.
Final Decision: All the above Tax Case (Appeals) were dismissed in favor of the assessee.
R. Sudhakar,J.
1. The above Tax Case (Appeals), filed by the Revenue as against the orders of the Income Tax Appellate Tribunal, were admitted by this Court on the following substantial questions of law:
"T.C.(A) Nos.2100 to 2102/2006 & 232/2007:
1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee was covered by item (x) of the Schedule Twelve and was eligible for deduction under Section 80HHC and
2. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the washing, chipping would result in transferring the quartz and feldspar into "processed minerals" under Schedule XII, when the Schedule specifically mentions the said minerals should be pulverized and micronised?
T.C.(A)Nos.2306 2307 and 396 of 2006:
"1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that exporter of manually washed/chipped quartz and feldspar is eligible for the deduction under Section 80HHC?
2. Whether in the facts and circumstances of the case activity of manual washing/ chipping of quartz and feldspar would fall under sl. x of 12th sch for the purpose of deduction under Section 80 HHC?"
2. The brief facts, common to all the above Tax Case (Appeals) are as follows:
The assessment involved in the above Tax Case (Appeals) are for the assessment years 1991-92, 1992-93, 1994-95, 1996-97, 1997-98, 1998-99 and 2001-2002 respectively. The assessee is an exporter of ores, quartz, feldspar, etc. He claimed deduction under Section 80HHC of the Income Tax Act in respect of profits retained for export business. The Assessing Officer, while completing the assessment under Section 143(3) of the Income Tax Act denied the benefit as claimed by the assessee and the reasons given by the Assessing Officer in the assessment order in respect of the assessment year 1991-92 (T.C.(A)No.2100 of 2006) is that feldspar exported by the assessee and the consequent benefit under Section 80HHC will be available only if such mineral is exported in the pulverized and micronised form. He rejected the assessee's plea that the goods exported would fall under Serial No.x of the 12th Schedule together with the explanation as a cut and polished mineral. The details of the process as explained by the assessee has been recorded in the assessment order itself. Nevertheless, the Assessing Officer considered the issue on two grounds viz., i) as to whether there was any processing and ii) whether the provisions contained in 12th Schedule would apply to the assessee's case. The Assessing Officer came to the conclusion that the various methods of processing undertaken by the assessee did not qualify for the benefit of Section 80HHC primarily on the ground that Feldspar should be exported in the pulverized and micronised form in terms of Item No.(i) in the 12th Schedule. For better clarity, the reasoning as set out by the Assessing Officer, reads as follows:
“ iii. The assessee has claimed deduction u/s.80HHC to the tune of Rs.86,09,977/- as per the provisions of sec.80HHC(2)(b). Section 80HHC does not apply to minerals and ores other than the processed minerals and ores as specified in the twelfth schedule. As per 12th Schedule, dealing with processed minerals and ores, deduction u/s. 80HHC is available in respect of Pulverized or micronised barytes, calcite, steatile, prophylite, wollanasonite, zircon, betonite, red or yellow oxide, read or yellow ochre, talc, quartz, feldspar, silica powder, granet, silliminite, fireclay, ballaclay, manganese dioxide ore, etc. The assessee has stated that the name of quartz and feldspar is mentioned in twelfth schedule and hence he will be entitled for deduction u/s.80HHC. He has also given notes on his claim stating that quartz is a mineral which is mined by open cast mining operations. The mining operations are quasi-meachaical. It is also stated by the assessee that drilling is done by compressors and blasted mechanically then chippi
