9911796707
TMI Blog2013 (12) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... he mining activities from the purview of Section 80HH - While interpreting the provision of a statute, this has to be considered literally as it appears, and it cannot be given a purposive meaning - Decided against assessee. - Referred Case No. 3 of 1996 - - - Dated:- 9-10-2013 - CJ Sri Kalyan Jyoti Sengupta And Sri K. C. Bhanu,JJ. For the Petitioner : Sri S. Ravi For the Respondent : Sri S. R. Ashok ORDER (Per Hon'ble the Chief Justice Sri Kalyan Jyoti Sengupta) This case has been referred under Section 256 of the Income Tax Act, 1961 (hereinafter referred to as 'said Act') by the learned Income Tax Appellate Tribunal, Hyderabad Bench, for opinion of this Court, on the following questions: 1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee can be said to be running two industrial undertakings one in respect of mining and other in respect of manufacturing cement, although the company was engaged in the business of manufacturing cement and mining of limestone was only as incidental activity? 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the identical issue in the assessment years 1984-85 and 1985-86, held that the assessee's main business was manufacturing of cement, which is entitled to deduction under Section 80HH, and there was no absolute prohibition that if the industrial undertaking is engaged in mining, then it would cease to be entitled to claim the deduction in respect of items manufactured or produced, which are entitled to deduction under Section 80HH, and that the assessee, in such a situation, can be said to have been running two industrial undertakings, one in respect of mining and the other in respect of manufacturing cement, and the profits attributable to mining would not be entitled to deduction under Section 80HH, whereas profits attributable to manufacturing of cement would enjoy the deduction and the profits could be allocated between the two activities/undertakings of the assessee. Following that order, the Tribunal directed the Assessing Officer to determine the profits attributable to manufacturing of cement and allow deduction with regard to that. 3. Mr. S. Ravi, learned senior counsel appearing for the assessee-company, submits that the Tribunal erred in holding that the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be taken into consideration and the same shall be treated as cost price of the raw material, and certainly the cost price must be much less than the market price, and therefore, the emerging difference price can be treated to be a profit. That apart, he contends that in the previous assessment years, namely 1984-85 and 1985-86, the Tribunal factually held that the assessee has been running two separate industrial undertakings and out of running of the same, the profit must have been derived and this factual position was accepted by the assessee. In the relevant assessment years, it is not contended that the factual situation, as far as running of two separate industrial undertakings is concerned, is different. He further submits that the words "derived from" are having a very restrictive meaning unlike the words "attributable to". So the legislature has laid emphasis on the words "profit derived from" and not "attributable to" and by virtue of sub-section (10) of Section 80HH, it has been expressly prohibited for granting deduction in relation to the mining activity. To support above contention, he has referred to a decision of the Constitutional Bench of the Supreme Court in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods. Therefore, in the manufacturing activity of cement unit, the cost of the finished product has to be ascertained and in that process, the cost of lime has also to be taken into consideration. In the case on hand, the lime, being a raw material, is not procured from open market and it has got its own indigenous supply. Therefore, the cost of the lime extracted from mining operation has to be ascertained from the cost price and it is found, while doing so, that the cost of lime of its own source (ordinarily it happens) is lesser than the market price. Therefore, the difference between the cost price of indigenous source and the market price is obviously the profit. Moreover, once lime is used from its indigenous source to manufacture the finished products and by virtue of sale of such finished products if there is any profit, then obviously that profit is also related to the mining operation. 8. The Constitutional Bench of the Supreme Court, in the case of Tata Iron Steel Co. Ltd (supra), almost on identical fact, at page 135, observed as follows: "It could not be disputed that factually the profit from the mining operation and the winning of the mineral is imbedded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian Chemicals Ltd (supra), the words "derived from" have been mentioned while dealing with Section 80HH of the said Act. Therein the Supreme Court, while following an old decision of the Privy Council in case of CIT v. RAJA BAHADUR KAMAKHYA NARAYAN SINGH [1948] 16 ITR 325, and further the decision of the Constitutional Bench of the Supreme Court in case of MRS. BACHA F. GUZDAR v. CIT [1955] 27 ITR 1 (SC), held that the words "derived from" in Section 80HH of the said Act must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking. Thus the profit, which has been derived in relation to the manufacturing activity of the cement, has to be taken into consideration and not for other manufacturing activity particularly for mining activity as the legislature has expressly excluded the mining activities from the purview of the deductability benefits under Section 80HH of the said Act. It is the settled proposition of law that while interpreting the provision of a statute, this has to be considered literally as it appears, and it cannot be given a purposive meaning. Hence, when the legislature has excluded the mining activity with the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
