TaxTMI 
TaxTMI 
2003 (10) TMI 24
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....f an order dated December I, 1995, made in I.T.A. No. 958/Bang of 1989 for the assessment year 1984-85. They are as follows: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that granite would fall under the category of 'mineral' in the context of clause (b)(ii) of sub-section (2) of section 80HHC? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the extraction of granite was a manufacturing activity and, therefore, the assessee was entitled to investment allowance under section 32A on the plant and machinery held by it in its operations?" When the said I.T.R.C. Nos. 23 and 24 of 1997 came up for consideration before the Division Bench of this court, the Division Bench of this court by its order dated January 6, 2000, answered the second question referred to above against the Revenue and in favour of the assessee. However, in the light of the decision of this court rendered in CIT v. Mysore Minerals Ltd. [1994] 205 ITR 461, felt that the first question referred to above is required to be considered by a larger Bench and accordingly directed the said cases to be placed before the....
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....t of their submission they referred to us the circular dated May 22, 1984, issued by the Central Government of Direct Taxes (hereinafter referred to as "the CBDT"), wherein the Central Board of Direct Taxes had clarified that the export of cut and polished diamonds cannot be construed as "mineral" to deprive the benefit granted under sub-section (1) of section 80HHC. They also pointed out that the Division Bench of this court in the case CIT v. Mysore Minerals Ltd. (No. 2) [2001] 250 ITR 728 relying upon the said Board Circular dated May 22, 1984, has taken the view that the export of cut and polished granites would be qualified for deduction under section 80HHC of the Act. It is also their submission that the circular of the Board being binding on the parties under the Act, it is not permissible for the authorities to take a plea contrary to the circular issued by the Board. They pointed out that the observation made by the Supreme Court in the case of Stonecraft Enterprises v. CIT [1999] 237 ITR 131 would clearly indicate that if granite is cut and polished it would be outside the purview of "mineral". Secondly, they submitted that the amendment made to section 80HHC(2)(b) by mea....
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....herefrom." It is their submission that the observation of the Supreme Court would clearly indicate that if granite is cut and polished, it will be outside the purview of "mineral". However, Sri Sheshachala, learned counsel appearing for the Department, while strongly countering the submissions of Sri Prasad and Sri Sarangan, firstly, pointed out that since the very contention having been considered and repelled by this court in the case of Muddeereswara Mining Industries and Stonecraft Enterprises v. CIT [1993] 204 ITR 550 which is affirmed by the Supreme Court in the case of Stonecraft [1999] 237 ITR 131, the questions raised in these proceedings are required to be answered against the assessees and in favour of the Revenue. It is his submission that the observation made by this court in the case of Muddeereswara [1993] 204 ITR 550 and also by the Supreme Court in the case of Stonecraft [1999] 237 ITR 131 would clearly indicate that the argument now advanced by learned counsel for the assessees is fully covered against them. It is his next submission that the assessees are not entitled to derive any benefit on the basis of the subsequent amendment made to section 80HHC(2)(b)(ii)....
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.... 1, 1995, would be available for the assessment years 1991-92 onwards; and a similar view is also taken by the Madras High Court in the case of Pooshya Exports P. Ltd. [2003] 262 ITR 417. We have given our careful consideration to the contentions thoughfully advanced by learned counsel appearing for the assessees which was with equal wisdom countered by counsel for the Revenue. Now, we will proceed to consider the first contention advanced on behalf of the asses sees that cut and polished granites are not minerals. However, before we do that, we think that it is useful to refer to section 80HHC(2)(b)(ii) of the Act prior to the amendment and subsequent to the amendment which reads as follows: Section 80HHC(2)(b) prior to amendment Section 80HHC(2)(b)(ii) after amendment (2)(b) This section does not apply to (2) (b) This section does not apply the following goods or merchandise, to the following goods or merchandise, namely:- (i) mineral oil; and (i) mineral oil ; and (ii) minerals and ores. (ii) minerals and ores ....
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....ourt has at page 564 observed that a mineral is a chemical composition and compound occurring in nature and having a definite chemical composition and properties. Chambers' 21st Century Dictionary defines "mineral" as follows: Chambers 21st Century Dictionary: "mineral noun 1 technical a naturally occurring substance that is inorganic, usually crystalline, and has characteristic physical and chemical properties by which it may be identified. 2 loosely any substance obtained by mining, including fossil fuels (e.g., coal, natural gas or petroleum) although they are organic. 3 any inorganic substance, i.e., one that is neither animal nor vegetable. 4 adj. belonging or relating to the nature of a mineral; containing minerals." The Law Lexicon defines: "Mineral. Anything that grows in mines, and contain metals. (Tomlins Law Dic.). The term 'minerals' includes all such bodies of mineral substances, lying together in seams, beds, or strata as are commonly worked for profit and have a value independent of the surface of the land, whether extracted from a mine or a quarry or even occurring as an outcrop (I.R. 1933 Nag. 179 = 143 I.C. 586 = 29 N.L.R. 148). Minerals include granite, cla....
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.... goods' are not the produce of any productive activity, but are extracted or obtained from 'mother earth'." Further, in the case of State of Mysore v. Swamy Satyanand Saraswati, AIR 1971 SC 1569, 1575 the Supreme Court took the view that granite is also a "mineral". At paragraph 13 of the said judgment, the Supreme Court has observed as follows: "13. . . . It is not in our view possible to hold otherwise than that granite is a mineral. According to Halsbury's Laws of England: 'There is no general definition of the word 'mineral'. The word is susceptible of expansion or limitation in meaning according to the intention with which it is used;... It is a question of fact whether in a particular case a substance is a mineral or not... The test of what is a mineral is what at the date of the instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among landowners, and in case of conflict this meaning must prevail over the purely scientific meaning. In article 675 at page 322 the learned authors surnrnarise the case law on the subject as to whether particular substances are minerals or not. Reference is there made to the case of Attorn....
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....t a broader meaning to the word "mineral" is required to be given by the courts and there is no justification to impose a restricted meaning. We are in respectiful agreement with the said view expressed by this court. If the intention of Parliament was to exclude cut and polished granite from the rigour of sub-section (2)(b)(ii) of the Act, nothing would have been easier than to state so in the provision itself. Admittedly, that has not been done. On the contrary, by means of an amendment made to the section by means of the Finance (No.2) Act of 1991, minerals which are cut and polished are excluded from the purview of sub-section (2)(b)(ii) of section 80HHC of the Act. Therefore, from the plain reading of the word "mineral" prior to the amendment made in the year 1991, we are of the view that even if the cutting or polishing of granite is made, the assessee would not be entitled for the benefit provided under section 80HHC of the Act. The view we have taken above gets support from the decision of this court in the case of Muddeereswara Mining Industries [1993] 204 ITR 550 and also of the Supreme Court in the case of Stonecraft [1999] 237 ITR 131. We are also unable to accede to th....
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.... of Kerala [1966] 60 ITR 262 (SC). On that principle, it is abundantly clear that when an assessment for the assessment year 1960-61 is to be made and section 24(2) is invoked, it is section 24(2) as in force in that assessment year which has to be applied. That is the provision as amended by the Finance (No.2) Act, 1957. There is no question of the assessee possessing any vested right under the law as it stood before the amendment. The assessment for one assessment year cannot, in the absence of a contrary provision, be affected by the law in force in another assessment year. A right claimed by an assessee under the law in force in a particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year. Therefore, inasmuch as the provisions of section 24(2), as amended in 1957, govern the assessment for the assessment year 1960-61, the High Court is right in affirming that the unabsorbed loss of Rs. 15,50,189 of the assessment year 195051 cannot be carried forward for more than eight years, and consequently, cannot be set off against the business income of the assessment year 1960-61." At this stage, it is necessary to refer to the submission....
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....he assessee had claimed deduction under section 80HHC on the processed articles of granite like slabs, monuments, tiles, etc., only. The finished products are clearly distinguishable from the raw materials. In the Board circular dated May 22, 1984, it has been held that the export of cut and polished granites would be qualified for the relief of deductions under section 80HHC of the Act. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to classify the exports into exports of cut and polished items and to allow the relief under section 80HHC of the Act, accordingly. The assessee had been denied deduction on the export of raw granites. The circular of the Board is binding on the authorities under the Act and they cannot take a plea contrary to the circular issued by the Board." With respect, we find it difficult to subscribe to the view expressed by this court in the said decision. In the said decision, this court proceeded on the basis that the circular applies to granite also. This court did not notice that the circular was issued in respect of diamonds. In this connection, it is useful to extract the relevant portion of the circular dated May 22, 1984, whic....