Commissioner of Income Tax-Delhi v. Subhash Chand Rastogi

1. By order dated 18.03.2003, the following substantial question of law was framed in this appeal filed by the Revenue which pertains to the Assessment Year 1991-92:- “Whether there was any material before the Tribunal to hold that the assessee was entitled to deduction under Section 80HHC of the Income Tax Act, 1961, in respect of alleged export of zinc oxide?.

2. The impugned order dated 20.11.2001 of the Income Tax Appellate Tribunal („Tribunal‟ for short) was passed in ITA No. 5350/DEL/94.

3. We have heard the counsel for the appellant-Revenue, but, there is no appearance on behalf of the respondent-assessee. 2014:DHC:4524-DB

4. The respondent assessee an individual in his return of income filed on 31.10.1991 declared taxable income of Rs. 20,000/- after claiming deduction of Rs. 45,51,898/- under Section 80HHC of the Income Tax Act, 1961 („Act‟ for short) on account of export of Zinc Oxide. The Assessing Officer disallowed the deduction under Section 80HHC on export of Zinc Oxide on two grounds;

(i) the export had been to Nepal and therefore, was not eligible under Section

5. The Commissioner of Income Tax (Appeals) („CIT(A)‟, in short) reversed the said finding holding that Zinc Oxide was not a mineral but an inorganic chemical and secondly that the export had been routed through Nepal on the instructions of the importer at Hong Kong. He held that the export was made to convertible foreign exchange area.

6. Aggrieved by the order of the CIT(A), Revenue preferred an appeal before the Tribunal. On the question whether export was made to Nepal or through Nepal, the findings of the Tribunal are recorded in paragraphs 3 and 4, which, for the sake of convenience, are reproduced below:

7. A reading of the aforesaid finding would indicate that the export was in fact 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.

8. The paper-book referred to in the order of the Tribunal has not been filed by the Revenue before us and we, therefore, cannot comment on the contents of the documents and what was stated and apparent from them. Revenue, being the appellant before us, should have placed the said documents on record, specially when the plea taken is that the decision of the Tribunal is factually perverse. As noticed, no specific question of perversity stands framed while admitting the appeal. It is also not clear whether the aforesaid documents were not filed before the Assessing Officer, as is argued. The Assessing Officer had denied entire claim under Section 80HHC of the Act including claim on exports of Brass Artware and Readymade Garments and this factum has been adversely commented upon by the CIT(A), who has recorded that the documents and details have been filed before the Assessing Officer but were ignored and not adverted to. Hence, on the first stand, we are not inclined to interfere with the order passed by the Tribunal.

9. However, learned counsel for the appellant-Revenue is correct that the Tribunal in the impugned order, 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. Our attention was drawn to Sub-clause (ii) of Section (b) to Section 80HHC, which states that the Section would not apply to minerals and ores other than processed minerals and ores specified in the 12th Schedule. It is stated that processed Zinc Oxide was not included in the 12th Schedule. Senior Standing Counsel has filed before us articles and extracts from books and internet to submit that Zinc Oxide widely considered to be a mineral in its purist form, yet to be thoroughly accurate, it is an inorganic chemical compound with varying chemical properties depending upon the application or use. Zinc Oxide, it is opined could never and cannot be used directly in the extracted form as a raw mineral and must undergo some synthetic chemical process to purify and alter its mineral structure. This compound in particular in crystallized form is primarily used in mineral make up and products of like nature. It is a sun blocker.

10. The order of the Tribunal, on the said issue and question is silent and does not deal and answer whether the product exported was a mineral or an ore and whether the product was a processed mineral or ore as specified in 12th Schedule. The contention of the Revenue is that this product is not mentioned in the list of processed mineral and ores specified in the 12th Schedule. What was exported, whether it was mineral in the pure form or was it a processed mineral or something else, is primarily a question of fact and this had to be decided and determined by the Tribunal. They are the final fact finding authority. We have already quoted paragraphs 3 and 4 of the order of the Tribunal. These are the only finding/discussion. The Tribunal, therefore, has not examined the aforesaid aspect though relevant and important to the issue in question.

11. We record that the counsel for the Revenue has relied upon the decision of the Supreme Court in Gem Granites Vs. Commissioner of Income-Tax, [2004] 271 ITR 322 and Stonecraft Enterprises Vs. Commissioner of Income Tax, [1999] 237 ITR 131 on the question of what would and should be considered to be a mineral, mineral oil etc. Reference is also made to the decision of the Karnataka High Court in Mithy Granite (P.) Ltd. Vs. Income Tax Officer, [2004] 266 ITR 151 in which, again the question of what is „mineral‟ has been examined and elucidated.