STONECRAFT ENTERPRISES VS COMMISSIONER OF INCOME-TAX
2001 P T D 1755
[237 1 T R 131]
[Supreme Court of India]
Present: S. P. Bharucha and R. C. Lahoti, JJ
STONECRAFT ENTERPRISES
Versus
COMMISSIONER OF INCOME‑TAX
Civil Appeals Nos. 144 to 146 of 1994, decided on 18/03/1999.
(Appeals by Special Leave from the judgment and order, dated July 28, 1993 of the Karnataka High Court in I.T.R.C. Nos. 134 to 136 of 1992).
(a) Income‑tax‑‑‑
‑‑‑‑Special deduction‑‑‑Profits from export business‑‑‑Special deduction not given in respect of minerals and ores‑‑‑Meaning of "minerals"‑‑‑ "Minerals" should be read in the context of words "mineral oil" and "ores" ‑‑‑Minerals would include granite‑‑‑Special deduction under S.80HHC not available for profits from export of granites‑‑‑Indian Income Tax Act, 1961, S.80HHC‑‑ Circular No.729, dated 1‑11‑1995.
Section 80HHC of the Income Tax Act, 1961, 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", a deduction in the computation of its total income of an amount not exceeding 50 per cent. of "the profits derived by the assessee from the export of such goods or merchandise". Subsection (2)(b) states: "this section does not apply to the following goods or merchandise, namely: (i) mineral oil; and (ii) minerals and ores". In construing the meaning of the word "minerals" the doctrine of noscitur a sociis is applicable. The word "minerals" in subsection (2)(b) of section 80HHC must be read in the context of "mineral oil" and "ores" with which it is associated. 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 subsection (2)(b) of section 80HHC, and the exporter thereof is, therefore, disentitled to the benefit of that section:
Held, dismissing the appeals, that the Circular issued by the Central Board of Direct Taxes is, dated November 1, 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 is a value added marketable commodity, therefore, the profits derived from the export of granite dimensional blocks would be eligible for deduction under section 80HHC. There was nothing on record to indicate that what the assessee exported was such value added granite so that, even assuming that the said Circular was explanatory and could, therefore, relate back to the year in question, the assessee could not derive any assistance therefrom. The assessee was not entitled to special deduction under section 80HHC in respect of granite exported from India, for the assessment years‑ 1985‑86,. 1987‑88 and 1988‑89.
Stonecraft Enterprises v. CIT (1993) 204 ITR 550 affirmed.
Banarsi Dass Chadha & Bros. v. Lt.‑Governor, Delhi Administration AIR 1978 SC 1587; (1979) 1 SCR 271; Pardeep Agarbatti v. State of Punjab (1997) 107 STC 561; (1997) 8 SCC 511 and State of Mysore v. Swamy Satyanand Sarswati AIR 1971 SC 1569 ref.
(b) Interpretation of statutes‑‑---
‑‑‑‑ Meaning of words‑‑‑Doctrine of noscitur a sociis.
(c) Words and phrases‑‑‑--
Minerals" ‑‑‑Meaning.
A.K. Ganguli, Senior Advocate (M.T. George, Advocate with him) for Appellant.
V. Gaurishanker, Senior Advocate (S. Rajappa, Advocate with him) for Respondent.
JUDGMENT
S.P. 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 (see (1993) 204 ITR 550, 553):
"(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, 1961?
(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.
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 April 1, 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 per cent. of "the profit derived by the assessee from the export of such goods or merchandise". Subsection (2)(b) states: "this section does not apply to the following goods or merchandise, namely, (i) mineral oil; and (ii) minerals and ores"
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 November 1, 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 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.
It is necessary immediately to note that the mines and Minerals (Regulation and Development) Act covers granite as a minor mineral. This Court in State of Mysore v. Swamy Satyanand Saraswati AIR 1971 SC 1569, has held that granite is a mineral. The Court quoted Halsbury's Laws of England thus (page 1575):
"The test of what is a mineral is what, at the date of the instrument in question, the word meant in the vernacular of the mining world, the commercial world,. and among landowners, 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 world granite was treated as anything but a mineral.
Reference was made to the judgment of this Court in Banarsi Dass Chadha & Bros. v. Lt.‑Governor, Delhi Administration AIR 1978 SC 1587; (1979) 1 SCR 271. 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 substances obtained from underneath the surface of the earth by digging or quarrying.
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 Agarbatti v. State of Punjab (1997) 107 STC 561; (1997) 8 SCC 511 thus (pages 565 and 107 STC):
"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 80HHC 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.
We agree that the said doctrine is applicable. The word "minerals" in subsection (2)(b) of section 80HHC must be read in the context of mineral oil and ores with which it is associated. It seems to us that these 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 subsection (2)(b) of section SOHIJC, and the exporter thereof is, therefore, disentitled to the benefit of that section.
There is no merit in the appeals and they are dismissed with costs.
M.B.A./ 524/FC Appeals dismissed.