1999 JTR(SC) 341
1999 AIR(SC) 1638 ; 1999 AIR(SCW) 1251 ; 1999 153 CTR 86 ; 1999 237 ITR 131 ; 1999 2 JT 332 ; 1999 2 Scale 219 ; 1999 3 SCC 343 ; 1999 2 SCR 17 ; 1999 TaxLR 477 ; 1999 103 Taxman 490 ; 1999 KHC 1062 ; 1999 3 Supreme 95
1999(3) Supreme 95
Supreme Court of India
(From Karnataka High Court)
S.P. Bharucha & R.C. Lahoti, JJ.
Stonecraft Enterprises -Appellant
versus
Commissioner of Income Tax -Respondent
Civil Appeal Nos. 144-146 of 1994
Decided on 18-3-1999
Counsel for the Parties :
For the Appellant : A.K. Ganguli, Sr. Advocate and M.T. George, Advocate.
For the Respondent : V. Gaurishanker, Sr. Advocate, S. Rajappa, Advocate.
Important Point
Granite is a mineral within the meaning of the terms found in Section 80HHC (b) and therefore an exporter of granite is not entitled to benefit of Section 80HHC.
Act Referred :INCOME TAX ACT : S.80(h)(h)(c)(2)(b)(ii)
(A) The Income Tax Act, specifically Section 80HHC as inserted by the Finance Act, 1983 with effect from 1 April 1983, allows a deduction of up to 50% of profits derived from the export of goods by an Indian company or resident individual, subject to the restriction that the provision does not apply to "minerals and ores." In the present appeals relating to Assessment Years 1985-86, 1987-88, and 1988-89, the question arises whether granite falls within the exclusionary definition of "minerals" under Section 80HHC(b)(ii). The Tribunal held that granite is a mineral, a position reinforced by the Mines and Minerals (Regulation and Development) Act and prior judicial precedent defining the term in its commercial and vernacular sense. A circular from the Central Board of Direct Taxes, dated 1 November 1995, further clarifies that only value-added dimensional granite blocks may qualify for the deduction, and raw granite remains classified as a mineral.
(B) The word "mineral" must be read in conjunction with the associated terms "mineral oil" and "ores" under the doctrine of noscitur a sociis, indicating that the section encompasses all substances extracted from the earth, including granite. The doctrine of ejusdem generis supports a broad interpretation, and the exclusion of "minerals" is not limited to those extracted from ores. The Tribunal correctly applied these principles to deny the deduction, as no evidence was presented to suggest the exported granite was in a value-added form that might fall outside the mineral exclusion.
Facts of the case:
The assessee, identified as an Indian company or resident entity, engaged in the export of granite and claimed a deduction under Section 80HHC of the Income Tax Act for profits derived from such exports. The Tribunal found that the assessee exported granite and determined that granite is a mineral within the meaning of the statute, rendering the claim ineligible for the deduction.
Findings of Court:
The Tribunal determined that granite is a mineral within Section 80HHC(b)(ii) and that the exclusion of "minerals and ores" applies. The doctrine of noscitur a sociis requires the term "minerals" to be read alongside "mineral oil" and "ores," covering all minerals extracted from the earth, including granite. The assessee failed to present evidence that the exported granite was in a value-added, processed form that might otherwise qualify for the deduction.
Issues:
(1) Whether granite is a "mineral" within the meaning of Section 80HHC(b)(ii) of the Income Tax Act? (2) Whether the assessee is entitled to the deduction under Section 80HHC for exported granite?
Ratio Decidendi:
The term "minerals" in Section 80HHC(b)(ii) must be interpreted in light of associated terms "mineral oil" and "ores" using the doctrine of noscitur a sociis, leading to the conclusion that all minerals, including granite, are excluded from the deduction. The exclusion is not limited to ores but encompasses all naturally extracted minerals, and the onus was on the assessee to prove that the exported granite was in a value-added state, which was not established.
Result:
The appeals are dismissed with costs, and the assessee is not entitled to the deduction under Section 80HHC for the exported granite.
(A) The Income Tax Act, specifically Section 80HHC as inserted by the Finance Act, 1983 with effect from 1 April 1983, allows a deduction of up to 50% of profits derived from the export of goods by an Indian company or resident individual, subject to the restriction that the provision does not apply to "minerals and ores." In the present appeals relating to Assessment Years 1985-86, 1987-88, and 1988-89, the question arises whether granite falls within the exclusionary definition of "minerals" under Section 80HHC(b)(ii). The Tribunal held that granite is a mineral, a position reinforced by the Mines and Minerals (Regulation and Development) Act and prior judicial precedent defining the term in its commercial and vernacular sense. A circular from the Central Board of Direct Taxes, dated 1 November 1995, further clarifies that only value-added dimensional granite blocks may qualify for the deduction, and raw granite remains classified as a mineral.
(B) The word "mineral" must be read in conjunction with the associated terms "mineral oil" and "ores" under the doctrine of noscitur a sociis, indicating that the section encompasses all substances extracted from the earth, including granite. The doctrine of ejusdem generis supports a broad interpretation, and the exclusion of "minerals" is not limited to those extracted from ores. The Tribunal correctly applied these principles to deny the deduction, as no evidence was presented to suggest the exported granite was in a value-added form that might fall outside the mineral exclusion.
Facts of the case:
The assessee, identified as an Indian company or resident entity, engaged in the export of granite and claimed a deduction under Section 80HHC of the Income Tax Act for profits derived from such exports. The Tribunal found that the assessee exported granite and determined that granite is a mineral within the meaning of the statute, rendering the claim ineligible for the deduction.
Findings of Court:
The Tribunal determined that granite is a mineral within Section 80HHC(b)(ii) and that the exclusion of "minerals and ores" applies. The doctrine of noscitur a sociis requires the term "minerals" to be read alongside "mineral oil" and "ores," covering all minerals extracted from the earth, including granite. The assessee failed to present evidence that the exported granite was in a value-added, processed form that might otherwise qualify for the deduction.
Issues:
(1) Whether granite is a "mineral" within the meaning of Section 80HHC(b)(ii) of the Income Tax Act? (2) Whether the assessee is entitled to the deduction under Section 80HHC for exported granite?
Ratio Decidendi:
The term "minerals" in Section 80HHC(b)(ii) must be interpreted in light of associated terms "mineral oil" and "ores" using the doctrine of noscitur a sociis, leading to the conclusion that all minerals, including granite, are excluded from the deduction. The exclusion is not limited to ores but encompasses all naturally extracted minerals, and the onus was on the assessee to prove that the exported granite was in a value-added state, which was not established.
Result:
The appeals are dismissed with costs, and the assessee is not entitled to the deduction under Section 80HHC for the exported granite.
Judgment
Bharucha, J.-We are concerned in these appeals with the Assessment Years 1985-86, 1987-88 and 1988-89. Two questions are before us but it is apparent that the question really to be answered is the first one. The questions read thus:
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was not correct in holding that “granite” is a “mineral” within the meaning of the term found in Section 80HHC(b)(ii), Income Tax Act?
2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is not entitled to the allowance claimed under Section 80HHC in respect of the granite exported from India?”
The questions having been answered against it, the assessee is in appeal.
2. There is no material in the finding of the Tribunal other than the indication that the assessee exports granite. The assessee claimed for the granite which it exported the deduction available under Section 80HHC of the Income Tax Act, 1961 as inserted by the Finance Act, 1983 with effect from 1st April, 1983. The relevant provision permits, where “an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies”, the deduction in the computation of its total income of an amount not exceeding 50% of “the profits derived by the assessee from the export of such goods or mechandise.” Sub-section (2)(b) states : “This section does not apply to the following goods or merchandise, namely: (i) mineral oil; and (ii) minerals and ores”.
3. It is the contention of learned counsel for the assessee that while granite is a mineral in the general sense, it is not a mineral for purposes of Section 80HHC and that, therefore, the deduction provided for therein is available to the assessee. Our attention has been drawn to the provision as it read before the appropriate year and thereafter. Our attention has also been drawn to a circular issued in the context of the later provision. This circular issued by the Central Board of Direct Taxes, is dated 1st November, 1995 and records the Board’s opinion that while granite alone can be considered as a mineral, any process applied to granite would deprive the quality of rough minerals from the dimensional blocks of granite, which was a value added marketable commodity; therefore, profits derived from export of granite dimensional blocks would be eligible for deduction under Section 80HHC of the Act. As we have already noted, there is nothing on record to indicate that what the assessee exports is such value added granite so that, even assuming that the said circular is explanatory and can, therefore, relate back to the year in question, the assessee cannot derive any assistance therefrom.
4. It is necessary immediately to note that the Mines and Minerals (Regulation and Development) Act covers granite as a minor mineral. This Court in The State of Mysore v. Swamy Satyanand Saraswati (dead) by his LRs.1 has held that granite is a mineral. The Court quoted Halsbury Laws of England, thus:
“The test of what is a mineral is what, at the date of instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among land owners, and in case of conflict this meaning must prevail over the purely scientific meaning.”
No material was laid by the assessee before the Tribunal to suggest that in the export would granite was treated as anything but a mineral.
5. Reference was made to the judgment of this Court in Banarsi Dass Chadha & Bros v. Lt. Governor, Delhi Administration & Ors.2. It was there held that the word ‘mineral’ is a word of common parlance, capable of a multiplicity of meanings depending upon the context. For example, the word is occasionally used in a very wide sense to denote any substance that is neither animal or vegetable. Sometimes it is used in a narrow sense to mean no more than precious metals like gold and silver. Again, the word ‘minerals’ is often used to indicate substance obtained from underneath the surface of the earth by digging or quarrying.
6. It is at this stage appropriate to refer to the argument of learned counsel for the assessee based upon the doctrine of noscitur a sociis, which, as he submitted, has been explained by this Court in Pardeep Aggarbatti, Ludhiana v. State of Punjab & Ors.3 thus:
Entries in the Schedules of sales tax and excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the entry draws colour from the other words therein. This is the principle of noscitur a sociis.”
It was submitted, based upon this doctrine, that the word “minerals” in Section 80 HHC should be read in the context of the word “ores” with which it was associated and must draw colour therefrom; that is to say, it must read as referring only to such minerals as are extracted from ores and not others, thus excluding granite.
7. We agree that the said doctrine is applicable. The word “minerals” in sub-section (2)(b) of Section 80 HHC must be read in the context of “mineral oil” and “ores” with which it is associated. It seems to us that these three words taken together are intended to encompass all that may be extracted from the earth. All minerals extracted from the earth, granite included, must, therefore, be held to be covered by the provisions of sub-section (b) of Section 80 HHC, and the exporter thereof is, therefore, disentitled to the benefit of that section.
8. There is no merit in the appeals and they are dismissed with costs.
(C.R.) Appeal dismissed.
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