2006 (2) TMI 123 - HC - Income Tax

Deduction under section 80HHC - Whether Tribunal was right in law in holding that the assessee engaged in export of granite is eligible for deduction under section 80HHC for the assessment years 1987-88 and 1988-89? - amendment brought by the Finance (No. 2) Act of 1991 to section 80HHC of the Income-tax Act is only prospective and effective from April 1, 1991, and for the assessment years 1987-88 and 1988-89 under consideration, the statutory provision is very clear in the sense that section 80HHC is not applicable to the export of granite. Accordingly, we hold that the Tribunal was not right in law in holding that the assessee engaged in export of granite is eligible for deduction under section 80HHC for the assessment years 1987-88 and 1988-89.

Summary

Issues involved:
Interpretation of section 80HHC for export of granite - Eligibility for deduction under section 80HHC for assessment years 1987-88 and 1988-89.

Analysis:

Interpretation of Section 80HHC:
The case involved the interpretation of section 80HHC of the Income-tax Act, 1961, specifically in relation to the eligibility for deduction for the export of granite for the assessment years 1987-88 and 1988-89. The assessee, engaged in quarrying and export of granites, had claimed deduction under section 80HHC, which was initially denied by the Assessing Officer. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow the deduction based on a previous decision of the Appellate Tribunal regarding the manufacturing or production aspect of granite extraction and export. The Tribunal upheld this decision, leading to an appeal by the Revenue challenging the allowance of deduction under section 80HHC.

Applicability of Section 80HHC to Granite Export:
The Revenue contended that the benefit under section 80HHC was not available to the export of granite based on previous judgments such as CIT v. Pooshya Exports P. Ltd. and Gem Granites v. CIT. The court analyzed the relevant provisions of section 80HHC and the amendments made to it, particularly noting the exclusion of minerals and ores from the scope of the section. The court referred to the wide construction of the term "minerals" as encompassing all extracted substances, including granite, as held in previous cases. The court emphasized that the 1991 amendment to section 80HHC indicated a specific exclusion for processed minerals and ores, including cut and polished granite, from the general exclusion applicable to minerals and ores.

Prospective Application of Amendment:
The court clarified that the amendment brought by the Finance (No. 2) Act of 1991 to section 80HHC was prospective and effective from April 1, 1991. Therefore, for the assessment years 1987-88 and 1988-89, the court held that section 80HHC was not applicable to the export of granite. Relying on the interpretations provided by previous judgments and the legislative intent behind the 1991 amendment, the court concluded that the assessee engaged in export of granite was not eligible for deduction under section 80HHC for the relevant assessment years.

Conclusion:
In conclusion, the court answered the references in favor of the Revenue and against the assessee, holding that the Tribunal was not correct in law in allowing the deduction under section 80HHC for the export of granite for the assessment years 1987-88 and 1988-89. The judgment provided a detailed analysis of the statutory provisions, judicial interpretations, and the legislative intent behind the relevant amendments, establishing the inapplicability of section 80HHC to the export of granite for the specified assessment years.