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2015 (3) TMI 20 - HC - Income TaxEligibility of deduction under Section 80HHC - activity of manual washing/chipping of quartz and feldspar - whether Feldspar while cutting and polishing undergoes any one of the processes as defined under the Explanation to the 12th Schedule? - Held that - In the assessment order, the Assessing Officer has accepted the process as defined in the Explanation to the 12th Schedule. We find that Feldspar, as a mineral, could be exported either in the cut and polished form or in the pulverized and micronised form. It is not correct to say that cut and polished feldspar is not a mineral. The pulverized and micronised is one among the various processes provided for different types of minerals. In the same manner, cut and polished minerals, undergoing various processes as per Explanation to the 12th Schedule, is a processed mineral. The Commissioner of Income Tax (Appeals) is correct in holding that if any one of the processes specified in the 12th Schedule is satisfied, then the benefit would be automatic. In our considered opinion, the restrictive meaning given by the Assessing Officer does not appear to be correct. The Assessing Authority misconstrued the 12th Schedule and the Explanation to deny the benefit of deduction under Section 80HHC only on the wrong premise that Feldspar should be exported only in pulverized and micronised form. If such a view is taken, item (x) of 12th Schedule will become redundant and meaningless. The decision of the Supreme Court in the case of Gem Granites V. Commissioner of Income-Tax reported in (2004 (11) TMI 13 - SUPREME Court) relied on by the Revenue does not get attracted to the facts of the present case, as the said case deals with the issue pertaining to the assessment year 1987-88, which is prior to the amendment in 1991. The present cases are after the amendment in the year 1991, wherein in clause (2) (b) (ii) of Section 80HHC of the Income Tax Act, the words other than processed minerals and ores specified in the Twelfth Schedule are inserted. But prior to the amendment in the year 1991, there are no words of restriction other than . - Decided in favour of the assessee
Issues Involved:
1. Eligibility of the assessee for deduction under Section 80HHC of the Income Tax Act. 2. Interpretation of "processed minerals" under Schedule XII, specifically whether washing and chipping qualify as processing. Issue-wise Detailed Analysis: 1. Eligibility of the Assessee for Deduction under Section 80HHC: The primary issue is whether the assessee, an exporter of ores, quartz, feldspar, etc., is eligible for deduction under Section 80HHC of the Income Tax Act. The Assessing Officer denied the benefit, arguing that feldspar should be exported in pulverized and micronised form to qualify for the deduction. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, however, ruled in favor of the assessee, stating that the goods exported fall under the definition of "processed minerals" as per item (x) of the 12th Schedule, which includes cut and polished minerals. 2. Interpretation of "Processed Minerals" under Schedule XII: The core issue revolves around the interpretation of "processed minerals" in the 12th Schedule. The Assessing Officer argued that merely washing and chipping the minerals does not qualify as processing because the Schedule specifies pulverizing or micronizing. The Commissioner of Income Tax (Appeals) countered this by stating that quartz and feldspar, when cut and polished, fall under item (x) of the 12th Schedule. The Tribunal supported this view, relying on the decision in ACIT Vs. GTC Enterprises, which indicated that cut and polished minerals are eligible for deduction under Section 80HHC. Detailed Judgment Analysis: - Assessing Officer's Standpoint: The Assessing Officer denied the deduction, emphasizing that the minerals should be pulverized and micronised to qualify as "processed minerals" under item (i) of the 12th Schedule. The officer concluded that the activities performed by the assessee (washing and chipping) did not meet the criteria for processing as defined in the Schedule. - Commissioner of Income Tax (Appeals): The Commissioner disagreed with the Assessing Officer, stating that the nature of goods exported (quartz and feldspar) falls under the definition of "processed minerals" as per item (x) of the 12th Schedule. The Commissioner highlighted that the Schedule mentions cut and polished minerals, and there is no requirement that this has to be done with machinery or power. Thus, the assessee's activities qualify for the deduction under Section 80HHC. - Income Tax Appellate Tribunal: The Tribunal upheld the Commissioner's decision, referencing the case of ACIT Vs. GTC Enterprises, which supported the inclusion of cut and polished minerals under item (x) of the 12th Schedule for the purposes of Section 80HHC deduction. - High Court's Decision: The High Court affirmed the Tribunal's decision, stating that feldspar, as a mineral, could be exported either in cut and polished form or in pulverized and micronised form. The Court clarified that the restrictive interpretation by the Assessing Officer was incorrect. The Court emphasized that if any one of the processes specified in the 12th Schedule is satisfied, the benefit of Section 80HHC should apply. The Court also noted that the 1991 amendment to Section 80HHC(2)(b)(ii) specifically included "other than processed minerals and ores specified in the Twelfth Schedule," thereby supporting the assessee's claim. Conclusion: The High Court dismissed the appeals filed by the Revenue, upholding the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. The Court ruled that the assessee is eligible for the deduction under Section 80HHC, as the exported minerals (quartz and feldspar) qualify as "processed minerals" under item (x) of the 12th Schedule. The substantial questions of law were answered in favor of the assessee and against the Revenue.
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