2003 (4) TMI 229 - AT - Income Tax

Export of fabricated mica products qualifies for deduction under section 80HHC for 1990-91

The Tribunal concluded that the assessee's export of fabricated mica products qualified for deduction under section 80HHC for the assessment year 1990-91 ... Deductions, Mica Issues Involved:1. Whether the assessee was eligible for deduction under section 80HHC of the Income-tax Act, 1961 for the assessment year 1990-91 in respect of export of fabricated mica products.2. Whether the Commissioner of Income-tax (CIT) was justified in invoking jurisdiction under section 263 of the Income-tax Act to withdraw the deduction under section 80HHC.Issue-wise Detailed Analysis:1. Eligibility for Deduction under Section 80HHC:The primary issue was whether the assessee's export of fabricated mica products qualified for deduction under section 80HHC for the assessment year 1990-91. The CIT argued that at the relevant time, minerals and ores, including processed minerals and ores, were excluded from the benefits of section 80HHC. The assessee contended that the products exported were not raw minerals but processed mica products, which should qualify for the deduction.The Tribunal examined section 80HHC(2)(b) as it stood at the time, which excluded 'minerals and ores' from the deduction. The Tribunal noted that the words 'including processed minerals and ores' were never on the statute book, and thus processed minerals and ores were not specifically excluded. The Tribunal referenced the Supreme Court judgment in Stonecraft Enterprises v. CIT, which emphasized the commercial meaning of the term 'mineral' over its scientific meaning. The Tribunal also considered CBDT instructions that clarified processed mica products would qualify for relief under section 80HHC.Ultimately, the Tribunal concluded that the assessee's products did not retain the basic character of minerals in the commercial sense and were thus eligible for the deduction under section 80HHC.2. Justification of CIT's Jurisdiction under Section 263:The CIT invoked section 263, asserting that the assessment order allowing the deduction was erroneous and prejudicial to the interests of the revenue. The Tribunal analyzed whether the CIT had material to justify this action. The Tribunal found that the CIT's basis for revision was flawed, as the exclusion of processed minerals was not supported by the statute or judicial precedents.The Tribunal also noted that the assessee had provided substantial evidence that the exported products were commercially different from raw minerals. The Tribunal concluded that the CIT did not have sufficient grounds to assume jurisdiction under section 263, and the original assessment order was not erroneous.Separate Judgments:- Accountant Member's View: The Accountant Member held that the assessee was entitled to the deduction under section 80HHC, as the exported products were not raw minerals but processed mica products, which did not fall under the exclusion in section 80HHC(2)(b).- Judicial Member's View: The Judicial Member disagreed, stating that the benefit of section 80HHC was not available for minerals and ores, including mica, during the assessment year 1990-91. The amendment allowing processed minerals and ores to qualify for the deduction was effective from 1st April 1991 and could not be applied retrospectively.- Third Member's Decision: The Third Member concurred with the Judicial Member, emphasizing that the amendment to section 80HHC(2)(b) was prospective and not applicable to the assessment year 1990-91. The Third Member held that the CIT was justified in withdrawing the deduction.Final Order:In accordance with the majority view, the appeal was dismissed, upholding the CIT's order to withdraw the deduction under section 80HHC for the assessment year 1990-91.