STONECRAFT ENTERPRISES vs. COMMISSIONER OF INCOME TAX

CIVIL APPEAL No. 144/1994Supreme Court[1999] 2 S.C.R. 1718 March 1999Bench: 2 JudgesAuthor: S.P. BHARUCHA, R.C. LAHOTI ENTERPRISES A5 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that 'granite' is a mineral covered under the provisions of sub-section 2(b) of Section 80HHC of the Income Tax Act, 1961, and therefore, the appellant-assessee is not entitled to claim the benefit of deduction thereunder. The Court applied the doctrine of noscitur a sociis, stating that the word 'minerals' in Section 80HHC(2)(b) must be read in the context of 'mineral oil' and 'ores' with which it is associated. These terms, taken together, are intended to encompass all that may be extracted from the earth. Consequently, all minerals extracted from the earth, including granite, are held to be covered by the exclusionary provision. The Court also noted that there was no material on record to indicate that the assessee exported value-added granite, thus rendering the CBDT circular unhelpful to the assessee's case. The appeals were dismissed.

What were the facts?

The appellant-assessee, Stonecraft Enterprises, was engaged in exporting granite. The assessee claimed a deduction under Section 80HHC of the Income Tax Act, 1961, on profits derived from such exports. Section 80HHC(2)(b) excludes "mineral oil" and "minerals and ores" from the benefit of this deduction. The Tribunal rejected the assessee's claim, holding that granite is a "mineral" within the meaning of Section 80HHC(2)(b). The assessee appealed this decision, arguing that while granite is a mineral in a general sense, it should not be considered a mineral for the purposes of Section 80HHC, especially when processed into value-added marketable commodities. The assessment years under consideration were 1985-86, 1987-88, and 1988-89.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that 'granite' is a 'mineral' within the meaning of the term in Section 80HHC(2)(b) of the Income Tax Act, 1961, thereby disentitling the assessee to the deduction. The assessee contended that granite, while generally a mineral, should not be classified as such for Section 80HHC purposes, particularly when it is a value-added marketable commodity. They relied on a CBDT circular suggesting that processed granite is eligible for deduction and invoked the doctrine of noscitur a sociis to argue that 'minerals' should be read in context with 'ores', excluding granite. The revenue, through the Tribunal's decision, maintained that granite is a mineral covered by the exclusion. 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. This issue is intrinsically linked to the first, as the entitlement hinges on the classification of granite.

Which sections of the Income-tax Act were involved?

Section 80HHC(2)(b)

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STONECRAFT ENTERPRISES A . v. COMMISSIONER OF INCOME TAX MARCH 18, 1999 " B [S.P. BHARUCHA AND R.C. LAHOTI, JJ.] Income Tax Act, 1961 : ---- Section 80HHC (2)(b)-Export of 'granite '-Deduction on the profits earned from export of goods-Exclusion of goods which were "mineral oil", c ''minerals'' and ''ores' '-Central Board of Direct Taxes issuing circular stating -. that value added granite eligible for deduction-No proof of granite exported by assessee suhjected to any process-Claim for deduction-Entitlement of- Held, ''Granite'' is a ''mineral under the provision of Section BOHHC (2)(b)- Thus, assessee not entitled.to claim benefit of deduction thereunder. D interpretation of statutes : Doctrine-Nmscitur sociis-Applicability of Words and Phrases: E ''Mineral (it'', ''Minerals'', ''Ores' '-Meaning and scope of in the context of Section 80HHC (2)(b) of the Income Tax Act, 1961. Appellant-assessee, was engaged in exporting 'granite'. Under Section 80HHC of the Income Tax Act, 1961, an assessee engaged in the business F of export of any goods or merchandise was entitled to deduction on the profits gained. However, under Sub-section (2)(d) of the said Section,

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