2007 (6) TMI 64 - HC - Income Tax

Court rules processed minerals only eligible for Section 80HHC deduction

The High Court ruled against the assessee in a case involving the interpretation of Section 80HHC for exporting cut and polished granites. The court held ... Deduction - AO contended that Assessee is not entitle for deduction u/s 80HHC of the Act on the ground that the assessee's activity of excavation, cutting and polishing the granites does not amount to manufacture - Held that AO contention was correct and allowed Issues:Interpretation of Section 80HHC for export of granites cut and polished.Analysis:The case involved a dispute regarding the eligibility of the assessee to claim a deduction under Section 80HHC of the Income-tax Act for exporting granites that were cut and polished. The assessee argued that the process of cutting and polishing the granites constituted manufacturing activity, making them eligible for the deduction. However, the Assessing Officer disallowed the deduction, stating that the activity did not amount to manufacturing. The Commissioner of Income Tax (Appeals) upheld this decision, leading to an appeal by the assessee to the Tribunal.Upon further appeal, the Tribunal ruled in favor of the assessee, considering the processing of granite like sizing and polishing as constituting manufacture. However, the High Court referred to a previous judgment in Gem Granites Vs. Commissioner of Income-tax, where it was held that cut and polished granite falls under the exclusionary clause of minerals in Section 80HHC. The court emphasized that the amendment in 1991 introduced a specific class of minerals and ores eligible for the deduction, indicating that only processed minerals and ores would qualify post-amendment.Applying the principles established in Gem Granites case to the present scenario, the High Court concluded that the export of granite, regardless of being cut and polished, was not entitled to the deduction under Section 80HHC before 1st April 1991. Therefore, the appeal was allowed in favor of the Revenue and against the assessee, upholding the decision that the assessee was not eligible for the deduction under Section 80HHC for exporting granites that were cut and polished.