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2014 (9) TMI 701 - HC - Income TaxEntitlement of deduction u/s 80HHC on export of zinc oxide - Whether there was any material before the Tribunal to hold that the assessee was entitled to deduction u/s 80HHC of the Income Tax Act, 1961, in respect of export of zinc oxide Held that - The export was made to a Hong Kong party whose name and details stand mentioned - The export proceeds were specified in U.S. Dollars - The Bank Realisation Certificate was filed and upon receipt converted into Indian Rupees - The paper-book has not been filed by the Revenue and no comment could be made on the contents of the documents and what was stated and apparent from them - the Tribunal has not considered their contention that Zinc Oxide is a mineral and therefore in terms of Sub-Section (2) to Section 80HHC of the Act, the export proceeds were not eligible thus, the matter is to be remitted back to the Tribunal for consideration of the issue that whether the exported goods were a mineral and therefore, not eligible for deduction in view of Section 80HHC (2)(b)(ii) of the Act Decided in favour of revenue.
Issues:
1. Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding deduction eligibility for export of Zinc Oxide. 2. Whether Zinc Oxide qualifies as a mineral under Section 80HHC. Interpretation of Section 80HHC: The case involved an appeal by the Revenue concerning the deduction claimed under Section 80HHC of the Income Tax Act, 1961 for the Assessment Year 1991-92. The respondent-assessee, an individual, declared a taxable income of Rs. 20,000 after claiming a deduction of Rs. 45,51,898 under Section 80HHC on account of the export of Zinc Oxide. The Assessing Officer disallowed the deduction citing that the export to Nepal was ineligible under Section 80HHC and that Zinc Oxide, being a mineral, did not qualify. However, the CIT(A) reversed this finding, stating that Zinc Oxide was an inorganic chemical and the export was made to a convertible foreign exchange area. The Tribunal upheld the CIT(A)'s decision, emphasizing that the export was to Hong Kong through Nepal, not to Nepal directly, making it eligible for the deduction under Section 80HHC. Classification of Zinc Oxide as a Mineral: The Revenue contended that Zinc Oxide should be considered a mineral under Section 80HHC, making the export proceeds ineligible for deduction. The Tribunal's order did not address this argument, leading to the conclusion that the issue of whether Zinc Oxide was a mineral or a processed mineral, as specified in the 12th Schedule, remained unresolved. The Tribunal's silence on this crucial aspect prompted the High Court to remand the case back to the Tribunal for a determination on whether the exported goods constituted a mineral, as per the provisions of Section 80HHC(2)(b)(ii). The Court highlighted the necessity for the Tribunal to ascertain whether the product was a mineral in its pure form or a processed mineral, considering the relevant legal precedents and definitions of "mineral" provided by the Supreme Court and the Karnataka High Court. In conclusion, the High Court ruled in favor of the appellant-Revenue, ordering a remand to the Tribunal for a detailed examination of whether Zinc Oxide qualified as a mineral under Section 80HHC. The Court emphasized the importance of determining the nature of the exported goods to ascertain their eligibility for deduction under the Income Tax Act, 1961.
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