1990 (6) TMI 110 - AT - Income Tax

Summary

Issues:
1. Interpretation of Section 80HHC of the Income-tax Act regarding deduction eligibility.
2. Whether granite stone processed into memorials and ornamental products qualifies as minerals for deduction under Section 80HHC.
3. Examination of expenditure details for foreign customers as directed by the Commissioner of Income-tax.

Analysis:
1. The case involved an appeal by the assessee against an order under Section 263 of the Income-tax Act, 1961, challenging the deduction allowed under Section 80HHC. The Commissioner contended that granite stones dealt with by the assessee were minerals, thus disqualifying the deduction. The assessee argued that the processed granite products were distinct from minerals and classified as handicrafts. The Tribunal considered the dictionary meanings of relevant terms and held that the assessee's exported products, such as cut and polished granite memorials, did not qualify as minerals under Section 80HHC(2)(b), entitling the assessee to the deduction.

2. The Tribunal further analyzed the classification of granite products in various trade documents and policies to support the contention that cut and polished granite memorials were distinct from minerals. It emphasized that the exported products were not in their crude form but had undergone significant processing, making them eligible for special facilities under the Export and Import Policy. Additionally, the Tribunal noted that granite was not listed as a mineral in the Seventh Schedule of the Income-tax Act, reinforcing the conclusion that the assessee's products did not fall under the category of minerals for the purpose of deduction under Section 80HHC.

3. The judgment also addressed the direction by the Commissioner regarding the examination of expenditure details for foreign customers. While the assessee did not challenge this direction for the assessment year 1985-86, the Tribunal found no reason to interfere with the Commissioner's directive, indicating a partial allowance of the appeals for both years based on the issues discussed. The Tribunal's decision emphasized the interpretation of statutory provisions, trade classifications, and the nature of the exported products to determine the eligibility for deductions under the Income-tax Act.