DY. C.I.T. vs. MAHARAJA SALT WORKS CO.(P) LTD

Facts

The assessee, Maharaja Salt Works (P) Ltd., filed its return for assessment year 1991-92, claiming a deduction of Rs. 6,98,313/- under Section 80HHC for exporting salt. The deduction was initially allowed. However, the CIT later revised the order, deeming it prejudicial to revenue, as the Assessment Officer had wrongly allowed the deduction. The assessee appealed to the ITAT, which allowed the appeal, holding that salt is not a 'mineral' and thus eligible for the deduction. The revenue has now filed this tax appeal before the High Court against the ITAT's order.

Held

The High Court held that salt manufactured from seawater does not fall within the definition of a mineral. The Tribunal had correctly distinguished the decision in Bhoor Chand vs. The State of Rajasthan and Others, noting that it was based on the Marwar Land Revenue Act and not applicable to the Income Tax Act, 1961, when read in consonance with the Constitution of India. The Constitution itself makes a distinction between minerals and salt. Therefore, the Tribunal's finding that the assessee was entitled to deduction under Section 80HHC in respect of the export of salt was upheld. The substantial question of law was answered in the negative, against the revenue and in favour of the assessee. The original order of the AO allowing the deduction was restored.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the ITAT was justified in holding that the expression “Minerals” does not include salt and therefore the assessee Company was eligible to deduction under section 80HHC, as per Section 80HHC of the Income Tax Act, 1961. Assessee's Contention: The assessee supported the ITAT's order, arguing that salt cannot be considered a mineral and the appeal lacked merit. Revenue's Contention: The revenue argued that the term ‘mineral’ is not restricted to substances extracted from mines and includes salt, citing the decision in Bhoor Chand vs. The State of Rajasthan and Others (AIR 1957 Rajasthan 213) to support the view that salt is a mineral, irrespective of its extraction method.