TaxTMI 
TaxTMI 
TaxTMI 
2005 (6) TMI 477
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4923/Mum./99. A copy of the order is placed on record. We find that similar issue has been dealt with elaborately by the Tribunal in the case of the assessee for the assessment year 1985-86 at pages 1 to 5 of the order. After dealing with the factual and legal position, the Tribunal recorded its finding at Paras 5F and 6, which are reproduced below : "In the case of CIT v. Bombay Dyeing and Mfg. Co. Ltd. 219 ITR 521 , the Hon'ble Supreme Court held that the amount contributed to the State Housing Board for constructing tenements for workers was a revenue expenditure. Moreover, it is on record that in the assessee's own case, the Tribunal has, in earlier years, held the construction expenditure of the school as welfare expenses. This finding, not stated to have been challenged, has attained finality. In view of the above, it is clear that the provisions of section 40A(9) are not attracted. The expenditure in question was incurred by the assessee wholly and exclusively for the purpose of its business. This ground, therefore, is allowed." 3. The ld. CIT DR, Shri Rajendra, supported the orders of the Revenue authorities, but, was fair enough to concede that similar issue has been d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....store this issue to the Assessing Officer with the direction that it may be verified as to whether the relevant sales tax has been paid before the due date for filing the return of income under section 139(1). Opportunity may be allowed to the assessee to substantiate this claim and if it is found that payment has been made as mentioned above, the same shall be allowed. 8. The ground Nos. 2 and 3 pertain to disallowance of guest house expenses. Without conceding, the ld. counsel for the assessee was fair enough to admit that this issue is covered against the assessee by the ITAT, Delhi Special Bench decision in the case of Eicher Tractors Ltd. v. Dy. CIT [2003] 84 ITD 49. Accordingly and respectfully following the precedent, the order of the ld. CIT(A) on this issue is confirmed. 9. The ground No. 4 pertaining to disallowance of entertainment expenses has not been permitted by the COD and, therefore, this ground stands rejected as such. 10. The ground No. 5 pertains to disallowance of expenditure incurred by the assessee on construction of school at Haldia under section 40A(9). The facts and circumstances are the same as for the assessment year 1986-87 wherein similar issue has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to the Mathura Refinery by adding the profit of the V.M. Pipeline. Subject to the above, the alternate grounds stand rejected." In the present case also alternative claim as reflected in the grounds of appeal is that the profits of V.M. Pipeline and M.J. Pipelines should be added to the profits of Mathura Refinery. In our view, the assessee must succeed on the alternative claim. As mentioned above, it has already been held by the Tribunal for the assessment year 1985-86 that V.M. Pipeline which is an input pipeline is not a separate industrial undertaking. We, therefore, hold that for the present assessment year also, the V.M. Pipeline and M.J. Pipeline which are the output pipelines for Mathura Refinery cannot be treated as independent industrial undertaking. However, the profits, if any, of these pipelines should be added to the profits of Mathura Refinery for the purpose of section 80HH. Similar claim under section 80-I has been made in respect of M.J. Pipeline, which is the subject-matter of ground No. 8. The factual and legal position will remain the same as for the purpose of section 80HH and, therefore, we direct that for the purpose of section 80-I also, the profits, if....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue is also considered and decided by the Bombay High Court in the case of CIT v. Parle Biscuits Ltd. [IT Appeal No. 215 of 2002, dated 23-8-2004]. A copy of the order has been filed. The question No. 2 before the High Court was as under : "Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in holding that income from interest, rent dividend and profit on sale of toothpaste should be included in the eligible profits for working out deduction allowable under section 32AB of the Income-tax Act ?" The question was decided at Paras 4 to 6 of the order, which may be reproduced : "Insofar as question No. 2 is concerned, we find that the controversy stands concluded by the judgment of the Supreme Court in the case of Apollo Tyres Ltd. v. CIT 255 ITR 273 . The Supreme Court in the case of Apollo Tyres Ltd. observed thus : 'A perusal of section 32AB, as it stood at the relevant time, shows that if an assessee has a total income including income chargeable to tax under the head 'Profits & gains of business and profession' and if the income from such business is derived from an 'eligible business' and if the assessee has out of such income utilize....
X X X X Extracts X X X X
X X X X Extracts X X X X
....). Accordingly, the Tribunal's view relating to deduction under section 32AB with regard to income from interest, rent, dividend and profit on sale of toothpaste that they fall within the meaning of 'eligible business' cannot be faulted." The ld. counsel, therefore, contended that the issue is fully covered in assessee's favour. The ld. CIT DR supported the orders of the Revenue authorities. 14. After considering the rival submissions, we are of the view that the issue is squarely covered in assessee's favour by the Bombay High Court decision referred to (supra). The order of the ld. CIT(A) on this issue is, therefore, reversed and the Assessing Officer is directed to re-compute the deduction allowable under section 32AB after including the relevant items of income in the profits of eligible business. 15. Coming to the controversy reflected in ground No. 10, we find that this issue has been dealt with by the ld. CIT(A) elaborately at pages 25 and 26 of his order. The assessee had claimed that roughly 95 per cent of the expenditure incurred by the assessee during the period of construction should be qualified under the head 'Plant & machinery' for the purposes of section 32AB. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oducts exported by the assessee can be classified only after the head 'Mineral Oil' and, therefore, the assessee is not entitled to deduction under section 80HHC. The ld. CIT(A) considered the following Bombay High Court decisions : (i) Burmah Shell Refineries Ltd. v. G.B. Chand, ITO [1966] 61 ITR 4. (ii) CIT v. Caltex (India) Ltd. [1989] 177 ITR 239 . 18. Shri Dastoor, the ld. counsel, forcefully contended before us that the petroleum products which are manufactured and refined by the assessee from out of crude oil cannot be classified as mineral oil. He submitted that mineral oil means crude oil and once the crude oil undergoes several processes of refining, its character completely transforms and it cannot be said that the given products like Naphtha, diesel and fuel oil are in the nature of mineral oil. The ld. counsel invited our attention to certain definitions of some relevant terms contained in dictionaries. To start with, he referred to the following definitions contained in P. Ramanatha Aiyer's The Law Lexicon : "Mineral - Any thing that grows in mines, and contain metals." "Mineral - Any substance that is neither animal nor vegetable. In narrow sense, no more than p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sil fuels that supply the bulk of the world's energy requirements." At page 180, petroleum refinery is defined as under : "Petroleum Refining - Crude oil as it is found in nature consists of complex mixtures of compounds containing hydrogen and carbon (hydrocarbons). In the petroleum refining process, useful products, such as gasoline, motor oil, and petrochemicals, are manufactured from crude oil which in general is unsuitable for direct use." He invited our attention to the discussion contained at pages 181 and 182 of the Encyclopaedia Britannica. The ld. counsel for the assessee pointed out that the primary refinery process is fractional distillation, which may be followed by other physical separation methods, such as solvent extraction in which superior lubricating stocks are extracted by means of a solvent. It is also pointed out that the separation processes described in the Encyclopaedia Britannica are based on differences in physical properties of the components of crude oil. By chemically changing their molecular structure, it is possible to convert less valuable hydrocarbon compounds into those in demand. The ld. counsel, with the help of a chart showing the refining p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jendra, the ld. CIT-DR, invited our attention to the order of the ld. CIT(A) and submitted that the Bombay High Court decision in the case of Caltex (India) Ltd. (supra) has been duly considered by the ld. CIT(A) together with the Bombay High Court decision in the case of Burmah Shell Refineries Ltd. (supra). The ld. CIT-DR contended that the facts of the present case are totally different from the facts of Caltex (India) Ltd. In that case, the assessee blended the crude oil with not less than 18 chemicals and also added dyes, vegetable oil and silicon. The end-product no more remained the mixture of hydrocarbon. He invited our attention to the observations of the Bombay High Court in the case of Caltex (India) Ltd. (supra) that the assessee's end-product was not mineral oil as extracted by refining. It is argued that indirectly it means that refined petroleum products, which remain the mixture of hydrocarbon will continue to be considered as only mineral oil. It is submitted that in the present case, the end-product remained only as a mixture of hydrocarbon, which was not the case in Caltex (India) Ltd. (supra). The ld. CIT-DR submitted that the Bombay High Court decision in the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ionary (page 546, Vol. I) is : 'Crude oil' or crude petroleum, n. : petroleum as it occurs naturally, as it comes from an oil well, or after extraneous substances (as contained water, gas and minerals) have been removed. In the Illustrated Petroleum Dictionary and Products Manual - by Petroleum Educational Institute, California - it has been mentioned that 'crude oil' - See Petroleum. Petroleum - Describes crude oil as it comes from the ground in its natural state of when secured from coal, shale and other sources. Its origin is not definitely known. The word is derived from the two Latin words, petra, meaning rock and oleum meaning oil and frequently called rock oil or earth oil. Sometimes found oozing from the surface and called seepage, but usually found far below the surface and in every continent on earth. Also known as mineral oil, crude oil and crude naphtha (page 311). In the Petroleum Dictionary by Lalia Phipps Boone (page 104), it has been mentioned : Crude mineral oil - petroleum. Designated crude to distinguish it from the refined oils manufactured from it. Petroleum, n. : An inflammable liquid, oily mixture of a great many hydrocarbons found in the earth. The qualit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis of the return filed by the assessee. The correctness of the return as to the factual position stated in the return has to be accepted for the time being and the assessment should be made on the basis that the facts stated in the return are correct. The Assessing Officer has no jurisdiction to enquire into questions of mixed facts and law. It was, therefore, observed by the High Court that the Assessing Officer acted in excess of his jurisdiction. It was, for this limited purpose, the ld. counsel argued that the High Court went into the implications of the expression 'mineral oil'. At page 500 of the Report, the High Court clearly observed that it would not be legitimate at this stage to decide the question one way or the other finally as further debate on the question would be permissible under law at the stage of final assessment after full inquiry into facts. It is true that the High Court held that prima facie the Company appears to have been engaged in the business of manufacture or production of mineral oil. The ld. counsel submitted that this was in the context of the interpretation of the words 'manufacture' and 'production' of mineral oil. If any other interpretation wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion has to be interpreted and understood in the light of dictionary definitions and the observations made by the Bombay High Court in the two cases which have been referred to in the order of the ld. CIT(A) and also relied upon by both the sides before us. The dictionary definitions with which we have been assisted by the ld. counsel for the assessee, in our view, do not in any way conclusively indicate that the refined petroleum products are not included in the expression 'mineral oil'. These definitions have already been reproduced by us above and in none of these definitions it is stated that the refined petroleum products are not included in the expression of mineral oil. The discussion contained in the relevant part of the New Encyclopaedia Britannica, in our view, does not in any way strengthen or substantiate the view that the expression 'mineral oil' would not include refined petroleum products. The Bombay High Court, in case of Caltex (India) Ltd. (supra) was concerned with the meaning of 'mineral oil' for the purpose of deciding as to whether lubricating oil is a mineral oil. As already mentioned above, the Bombay High Court considered the fact that the lubricating oil w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds as under : "Mineral oil - Petroleum as it comes from the ground is frequently called mineral oil because it comes from a mineral surrounding; also to distinguish it from oil secured from vegetable and animal sources. It may refer to (1) crude oil coming naturally from the ground or secured from coal, shale or any other natural source; (2) any one of the many products secured from the crude oil or secured from coal, shale or other natural sources." After considering these various authentic definitions and meaning of the phrase 'mineral oil', the Bombay High Court observed that it is clear that the expression 'mineral oil' is wide enough to include both petroleum in its crude form as well as the products secured or obtained from the crude oil by refining. In our view, merely because these observations were made while deciding a writ petition and the matter was not finally decided by the Bombay High Court, the persuasive force of the observations made by the Bombay High Court are not in any way diluted. 22. We have also perused the chart of physicochemical properties of the petroleum products filed before us and from this chart, we find that there variation in the percentage of ....