2004 (11) TMI 13 - SC - Income Tax

Appellant exports granite. According to the appellant the granite is cut and polished before export. The appellant claims deduction u/s 80HHC in respect of profits from its export business - HC has clearly proceeded on a misreading of the 1984 circular by holding that the circular expressly provided that polished and processed granite did not fall within the meaning of word minerals in 80HHC(2)(b) as it stood before 1991- decision of the HC is set aside - revenue s appeal is allowed

Issues Involved:
1. Eligibility for deduction under Section 80HHC of the Income-tax Act, 1961, for the export of cut and polished granite.
2. Interpretation of the term "minerals" in Section 80HHC(2)(b) before and after the 1991 amendment.
3. Retrospective application of the 1991 amendment to Section 80HHC.
4. Relevance of CBDT circulars and subsequent legislation for interpreting Section 80HHC.

Detailed Analysis:

1. Eligibility for Deduction under Section 80HHC:
The appellant, an exporter of cut and polished granite, claimed a deduction under Section 80HHC of the Income-tax Act, 1961, for the assessment year 1987-1988. The appellant argued that processed granite should not be classified as a mineral under Section 80HHC(2)(b), which excluded minerals and ores from the deduction benefit. The appellant cited the legislative history and CBDT circulars to support their claim that processed granite should be eligible for the deduction.

2. Interpretation of the Term "Minerals":
The court examined whether the term "minerals" in Section 80HHC(2)(b) included processed minerals such as cut and polished granite. The court referred to its previous decision in *Stonecraft Enterprises v. CIT [1999] 237 ITR 131*, which held that the term "minerals" should be broadly construed to include all forms of minerals, whether processed or not. The court emphasized that there were no words of restriction qualifying the term "minerals" in the statute, and thus it should be read to include all kinds of minerals.

3. Retrospective Application of the 1991 Amendment:
The 1991 amendment to Section 80HHC introduced an exception for processed minerals and ores specified in the Twelfth Schedule, including cut and polished granite. The court had to determine whether this amendment was clarificatory and thus applicable retrospectively. The court concluded that the 1991 amendment was not intended to be retrospective, as there was no express provision or necessary implication indicating such an intention. The court stated that every statute is prima facie prospective unless explicitly stated otherwise.

4. Relevance of CBDT Circulars and Subsequent Legislation:
The appellant cited various CBDT circulars and subsequent legislative changes to support their interpretation of Section 80HHC. The court examined Circular No. 178/206/83 dated May 22, 1984, which stated that the export of cut and polished diamonds and gems would qualify for relief under Section 80HHC. However, the court noted that this circular specifically addressed diamonds and gems, not granite. The court also reviewed the 1994 and 1995 circulars, which clarified the scope of the 1991 amendment but did not support the appellant's claim for retrospective application.

The court emphasized that subsequent legislation could be considered to interpret earlier statutory provisions, but only if the earlier provision was ambiguous. In this case, the court found no ambiguity in the pre-1991 version of Section 80HHC(2)(b), which clearly excluded minerals from the deduction benefit.

Conclusion:
The court held that the term "minerals" in Section 80HHC(2)(b) included cut and polished granite, and the 1991 amendment did not apply retrospectively. Therefore, the appellant was not entitled to the deduction for the assessment year 1987-1988. The court dismissed the appellant's appeal and upheld the decisions of the lower courts, which had denied the deduction based on the clear language of the statute and the legislative intent. The court also set aside a High Court judgment that had misinterpreted the 1984 circular and allowed the Department's appeal in a related case.

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