TaxTMI 
TaxTMI 
2011 (8) TMI 422
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....he appellant for the Assessment Year 1990-91 for which the relevant previous year was the financial year ending on March 31, 1990. b) The appellant carries on business of manufacturing various Mica products from raw mica obtained from mines. c) Mica obtained from the mines is subjected to several operations, such as, disintegration, washing, drying and removal of the alien and scissors to obtain specific sizes. Further process is undertaken to differentiate between different qualities and to obtain different thickness. d) The fabricated mica parts, depending upon the requirement of the buyers, are coated with silver paste by the process of screen printing. The printing machine is also filled with a small furnace for the purpose of drying the Silvered Mica parts. Such silvered mica parts are subjected to further drying in a bigger furnace at high temperature. e) The appellant also manufactures Mica flakes by pulverizing selected mica pieces. Flakes are manufactured in different mesh specifications depending upon the buyers' requirements and are used in the manufacture of pearlescent pigment. f) According to the appellant, t....
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....eferred to a Third Member who by an order dated March 31, 2003 agreed with the view taken by the Judicial Member and subsequently, by an order dated April 7, 2003 the Division Bench of the Tribunal dismissed the appeal filed by the appellant in view of the majority view. Being dissatisfied, the assessee has come up with the present appeal. A Division Bench of this Court, at the time of admission of this appeal formulated the following substantial questions of law: "1) Whether on a true and proper interpretation of Clause (b) of Sub Section (2) of Section 80HHC of the IT Act, 1961 prior to its amendment with effect from April 01, 1991, the export of fabricated mica products, namely, fabricated mica electronic components was not eligible for deduction under Section 80HHC and the Tribunal was justified in upholding the order passed by the Commissioner of Income Tax under Section 263 withdrawing the deduction allowed in the assessment? "2) Whether the Tribunal was justified in law in holding that the goods exported by the appellant were not manufactured products of mica or new and distinct commercial commodities different from the mineral mica obtained for....
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....eported in 271 ITR Page 322 and Stonecraft Enterprises Vs. Commissioner of Income-tax, reported in 1999 237 ITR page 131. Mr. Khaitan, therefore, prays for setting aside the order under Section 263 of the Act. Mr. Nizamuddin, the learned Advocate appearing on behalf of the Revenue, has, on the other hand, opposed the aforesaid contention of Mr. Khaitan and has contended that in view of the decision of the Supreme Court in the case of Gem Granites Vs. Commissioner of Income-tax (Supra), the Tribunal below rightly dismissed the appeal. Therefore, the first question that arises for determination in this appeal is whether the products exported by the appellant came within the purview of exclusion of the benefit of Section 80HHC of the Act as provided in sub-section 2(b) thereof for the relevant assessment year. In order to appreciate the aforesaid question it will be profitable to refer to the provision contained in Section 80HHC of the Act it stood at the relevant time along with its amendments which were given effect to from the next assessment year: "Deduction in respect of profits retained for export business. 80HHC. (1) Where an as....
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.... as the Chief Commissioner or Commissioner may allow in this behalf. (b) This section does not apply to the following goods or merchandise namely:- (i) mineral oil; and (ii) minerals and ores (other than processed minerals and specified in the Twelfth Schedule). (words in bracket added with effect from April 1, 1992) The following Explanations shall be inserted by the Finance (No.2) Act, 1991 w.e.f. 1-4-1992: Explanation 1: The sale proceeds referred to in clause (a) shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. Explanation 2: For the removal of doubts, it is hereby declared that where any goods or merchandise are transferred by an assessee to a branch, office warehouse or any other establishment of the assessee situate outside India and such goods or merchandise are sold from such branch, office, warehouse or establishment, then such transfer shall be deemed to be export out of India of such goods and merchandise and the value of such goods or m....
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....ars to the total turnover of the business carried on by the assessee. Explanation: For the purposes of this sub-section,- (a) "adjusted export turnover" means the export turnover as reduced by the export turnover in respect of trading goods; (b) "adjusted profits of the business" means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3); (c) "adjusted total turnover" means the total turnover of the business as reduced by the export turnover in respect of trading goods; (d) "direct costs" means costs directly attributable to the trading goods exported out of India including the purchase price of such goods; (e) "indirect costs" means costs, not being direct costs, allocated in the ratio of the export turnover in respect of trading goods to the total turnover' (f) "trading goods" means goods which are not manufactured by the assessee. (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be,- ....
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....a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962); (b) "export turnover" means the sale proceeds, received in, or brought into, India by the assessee in convertible foreign exchange in accordance with clause (a) of sub-section (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962); (ba) "total turnover" shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962); Provided that in relation to any assessment year commencing on or afte4r the 1st day of April, 1991, the expression "total turnover" shall have efffect as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of Section 28; The following clause (baa) shall be inserted by the Finance (No.2) Act, 1991, w.e.f. 1-4-1992: (baa) "profits of the business" mea....
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.... 1st day of April, 1991 if the assessee was engaged in the business of such hotel or as such tour operator during the previous year relevant to any of the said assessment years. Explanation: The expression "office machines and apparatus" includes all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and for data processing (not being computers within the meaning of section 32AB). 23. Steel furniture, whether made party or wholly of steel. 24. Safes, strong boxes, cash and deed boxes and strong room doors. 25. Latex foam sponge and polyurethane foam. 26. *** 27. Crown corks, or other fittings of cork, rubber, polyethylene or any other material. 28. Pilfer-proof caps for packaging or other fittings of cork, rubber, polyethylene or any other material. 29. ***. THE TWELFTH SCHEDULE [see section 80HHC (2)(b)(ii)] PROCESSED MINERALS AND ORES (i) Pulverised or micronised-barytes, calcite, steatite, pyrophylite, wollastonite, zircon, bentonite, red or yellow oxide, red or yellow ochre, ....
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.... The aforesaid amended provision has been given effect to not retrospectively but prospectively from the next assessment year. Thus, from the next assessment year, the appellant would get the benefit of the said section for exporting the similar item of goods and merchandise. We are unable to accept the contention of Mr. Khaitan that simply because the goods and merchandise exported by his client were made by converting mica into pieces of specific sizes, the same lost its character as goods and merchandise of the category of "minerals and ores". In the sub-section 2(b) for the relevant assessment year what was excluded from the benefit of the section 80HHC was not simply the export of "minerals or ores" but also "goods and merchandise, namely, minerals or ores" and thus, any articles for sale if made of minerals or ores came within the purview of such expression although from the next assessment year, processed articles from minerals have been given benefit. From the materials on record, we find that the subject-matter of export was really processed minerals within the meaning of the Twelfth Schedule and the appellant's item of export came within item ....