1980 (4) TMI 104 - HC - Income Tax

Court rules kyanite not 'mineral ore' for tax credit. Revenue's interpretation upheld.

The court held that kyanite does not qualify as a 'mineral ore' under the Tax Credit Certificate (Exports) Scheme, 1965. The court emphasized the ... Industrial Undertaking Issues Involved:1. Whether kyanite qualifies as a 'mineral ore' under Item No. 19 of the Tax Credit Certificate (Exports) Scheme, 1965.2. Interpretation of the term 'ore' in the context of tax credit eligibility.Detailed Analysis:Issue 1: Whether kyanite qualifies as a 'mineral ore' under Item No. 19 of the Tax Credit Certificate (Exports) Scheme, 1965.The appellants, companies involved in the manufacturing and exporting of refractories including calcined kyanite, challenged the rejection of their applications for tax credit certificates by the Assistant Director of Tax Credit (Exports). The rejection was based on the determination that kyanite did not qualify as a 'mineral ore' under Item No. 19 of the Scheme. The Director of Tax Credit (Exports) upheld this decision, stating that 'ore' is defined as an aggregate of minerals from which a metal can be profitably extracted, and kyanite did not meet this criterion.Issue 2: Interpretation of the term 'ore' in the context of tax credit eligibility.The core question was whether kyanite could be considered a 'mineral ore'. The appellants argued that modern usage of the term 'ore' should include any mineral that can be mined or worked out at a profit, not necessarily requiring metallurgical extraction. They supported their argument with various definitions and authorities, including a broader definition from R. D. Parks and observations from 'Introduction to India's Economic Minerals' by N. L. Sharma and K.S.V. Ram.The revenue countered that kyanite, despite containing alumina, could not be classified as an ore because the metal could not be commercially extracted at a profit. They cited numerous authoritative sources defining 'ore' as a mineral from which metal can be profitably extracted.Judgment:The court reviewed various authoritative definitions of 'ore' and concluded that the widely accepted definition is that an ore must be a mineral from which metal can be extracted profitably. The court noted that while some authorities suggested that a mineral mined at a profit could be considered an ore, this view was not widely supported and was against the weight of the authorities.The court emphasized the importance of the popular meaning of terms in taxing statutes, as endorsed by the Supreme Court in CST v. Jaswant Singh, which advised adopting the commercial sense of terms. The court found that the revenue's interpretation was neither perverse nor unreasonable and adhered to the popular definition of 'ore'.The court also referenced the Supreme Court's stance in Collector of Customs v. Ganga Setty, which held that if an interpretation favoring the revenue is reasonably adopted, the court should not interfere merely because another interpretation might seem preferable.Conclusion:The court dismissed the appeals, agreeing with the revenue's interpretation that kyanite does not qualify as a 'mineral ore' under the Scheme. The learned judge's decision to discharge the rules nisi was upheld, and the appellants' interpretation was not accepted for the purpose of obtaining tax benefits under the Scheme. The court concluded that the popular and commercially accepted definition of 'ore' should be applied, which requires the profitable extraction of metal from the mineral.Both appeals were dismissed without any order for costs.