2014 (11) TMI 801 - HC - Income Tax

Eligibility to deduction u/s 80HHC Minerals include salt or not - Whether the Tribunal was justified in holding that the expression Minerals does not include salt and therefore the assessee Company was eligible to deduction u/s 80HHC Held that - The Tribunal was rightly of the view that the Constitution has made a clear distinction between minerals and salt - salt did not form part of the exception from the meaning of the term Minerals - there is no reason or basis to interpret the word mineral as inclusive of salt the assessee is held to be entitled for the deduction u/s 80HHC in respect of export of salt the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Interpretation of the term "mineral" for the purpose of tax deduction under section 80HHC.

Analysis:
The High Court of Gujarat heard an appeal challenging the order of the Income Tax Appellate Tribunal (ITAT) regarding the eligibility of a company for a tax deduction under section 80HHC for exporting salt. The main issue revolved around whether salt could be considered a "mineral" for the purpose of the tax deduction.

The appellant, represented by Mr. Pranav Desai, argued that the term "mineral" should not be restricted to substances extracted from mines but should also include salt. He cited a decision from Rajasthan to support his argument that salt should be considered a mineral regardless of its extraction process.

On the other hand, the respondent, represented by Mr. Prakash K Jani, supported the ITAT's decision that salt does not fall under the category of minerals. The respondent contended that the appeal lacked merit and should be dismissed.

After considering the arguments from both sides and reviewing the orders of the ITAT and the CIT, the High Court noted that the Constitution makes a clear distinction between minerals and salt. The Court referred to a previous decision by the Ahmedabad Bench of the Tribunal, which held that salt cannot be classified as a mineral or ore.

The Tribunal's order highlighted that salt was not part of the exceptions listed in the relevant schedule of the Income Tax Act. The Court emphasized that the legislative intent was clear in not granting the benefit of section 80HHC for salt exports. The Court also stressed the need to interpret the term "mineral" in line with the Constitution of India, which distinguishes between minerals and salt.

Ultimately, the High Court agreed with the Tribunal's reasoning and upheld the decision that salt, particularly when manufactured from sea water, does not meet the definition of a mineral for tax deduction purposes. The Court dismissed the appeal, ruling in favor of the assessee and against the revenue. No costs were awarded in the matter.