C.I.T.UDAIPUR vs. M/S ARIHANT TILES and MARBLES PVT.LTD.

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 1/13 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR :: O R D E R :: (1) D.B. INCOME-TAX APPEAL No.29 OF 2008 APPELLANT: RESPONDENT: Commissioner of Income- v. M/s Arihant Tiles & tax, Udaipur Marbles Pvt Ltd (2) D.B. INCOME-TAX APPEAL No.44 OF 2007 Commissioner of Income- v. M/s Aravali Minerals & tax, Udaipur Chemical Industries Pvt Ltd (3) D.B. INCOME-TAX APPEAL No.39 OF 2008 Commissioner of Income- v. M/s Galaxy Exports tax, Udaipur (4) D.B. INCOME-TAX APPEAL No.46 OF 2008 Commissioner of Income- v. M/s S M T International tax, Udaipur (5) D.B. INCOME-TAX APPEAL No.58 OF 2008 Commissioner of Income- v. Tej Singh tax, Udaipur (6) D.B. INCOME-TAX APPEAL No.86 OF 2008 Commissioner of Income- v. M/s Green Marble tax, Udaipur House Pvt Ltd (7) D.B. INCOME-TAX APPEAL No.87 OF 2008 Commissioner of Income- v. M/s Green Marble tax, Udaipur House Pvt Ltd (8) D.B. INCOME-TAX APPEAL No.93 OF 2008 Commissioner of Income- v. Geeta Rao tax, Udaipur

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 2/13 (9) D.B. INCOME-TAX APPEAL No.26 OF 2010 Commissioner of Income- v. M/s Jyoti Minerals tax, Udaipur Pvt Ltd (10) D.B. INCOME-TAX APPEAL No.72 OF 2011 Commissioner of Income- v. Mangi Lal tax (Central), Jaipur (11) D.B. INCOME-TAX APPEAL No.73 OF 2011 Commissioner of Income- v. Mangi Lal tax (Central), Jaipur :: Date of Order : 20 February 2013 :: PRESENT HON'BLE MR JUSTICE NARENDRA KUMAR JAIN HON'BLE MR JUSTICE V.K. MATHUR Mr K.K. Bissa, for the appellant-revenue Mr M.S. Singhvi, Senior Advocate, assisted} by Mr Vineet Dave, Mr Anjay Kothari, } Mr Sanjeev Johari, Mr Dinesh Mehta }for respondents BY THE COURT [PER JUSTICE V.K. MATHUR]: All these appeals, as they involve similar substantial question of law, are being decided by this common order. 2.These appeals have been filed by the Revenue under sec.260-A of the Income-tax Act, 1961 {for brevity, hereinafter referred to as 'the Act'} being aggrieved by orders passed by the Income-tax Appellate Tribunal, Benches at Jodhpur whereby learned ITAT decided

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 3/13 appeals of respective parties, by holding that cutting and polishing of marble blocks exported by the assessees had led to high value addition and thereby the assessees were eligible for deductions under sec.80HHC of the Act during the relevant assessment years. 3.While admitting present appeals of the Revenue, a coordinate Division Bench of this Court framed following substantial question of law under sec.260-A of the Act: “Whether in the facts and in the circumstances of the case as well as in the law, the learned Tribunal was justified in directing to allow deduction under Section 80 HHC on export of marble blocks which were not polished as required vide item (x) of the 12th Schedule and ignoring the fact that there was no value addition in terms of cost of exported blocks as required in Circular No.693 dated 17.11.1994?” 4.The learned counsel for the appellant-Revenue, Mr K.K. Bissa, submitted that the marble blocks, which were exported by assessees, were not 'polished' as required by 12th Schedule and there was no value addition in terms of cost of exported blocks. He further submitted that the assessees are not entitled to deduction under sec.80HHC of the Act. 5.On the other hand, learned counsels for assessee- respondents submitted that the exported marble blocks were cut and polished and were eligible for deductions permissible under sec.80HHC of the Act. 6.In support of their claim, the assessees had submitted

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 4/13 office copies of invoices/vouchers/certificates for showing that cutting and polishing of the mable blocks had been done. Learned counsels further relied upon decision of Hon'ble Karnataka High Court in the case of C.I.T. v. God Granites – [1999] 240 ITR 343 (Kar), which was affirmed by the Hon'ble Apex Court in the case of C.I.T. v. God Granites – [2003] 262 ITR 567 (SC). 7.Learned counsels also submitted that the appellant- Revenue had not challenged findings of facts arrived at by the ITAT and that findings of facts are binding on this Court. The learned counsels for the respondents relied upon decision of Hon'ble Apex Court in the case of Sudarshan Silk & Sarees v. Commissioner of Income-Tax – [2008] 300 ITR 205 (SC) and contended that the assessee-respondents are entitled to benefit of deduction under sec.80HHC of the Act regarding export of marble blocks. 8.We have heard learned counsels at length, perused the impugned orders and given our thoughtful consideration to rival submissions of the parties. 9.The relevant provisions of the Statute, which are necessary for adjudication of the present dispute may be referred to at this stage. Section 80HHC of the Act reads: “(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in business of export out of India of any goods or merchandise to which this section

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 5/13 applies, there shall, in accordance with the subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the (profits) derived by the assessee from the export of such goods or merchandise: Provided .............. (b) This section does not apply to the following goods or merchandise, namely: (i) Mineral oil, and (ii) minerals and ores (other than processed minerals and ores specified in the Twelfth Schedule).” 10.Item (x) of the 12th Schedule relating to minerals and rocks reads: “(i) to (ix) .... .... ... (x) Cut and polished minerals and rocks including cut and polished granite. Explanation: For the purpose of this Schedule, 'processed', in relation to any mineral or ore, means: (a) dressing through mechanical means to obtain concentrate after removal of gangue and unwanted deleterious substances or through other means without altering the mineralogical identify; (b) pulverisation, calcination or micronisation; (c) agglomeration from fines; (d) cutting and polishing; (e) washing and levigation; (f) benefication by mechanical crushing and

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 6/13 screening through dry process; (g) sizing by crushing, screening, washing and classification through wet process; (h) other upgrading techniques such as removal of impurities through chemical treatment, refining by gravity separation, bleaching, floatation or filtration.” 11.The Circular No.693 dated 17th November 1994 reads as under: “ Circular No.693, dt.17th Nov. 1994 Sub: Benefit of section 80HHC for export of processed minerals – clarification regarding export of cut and polished dimensional blocks, granite or other rocks Section 80HHC of the Income-tax Act allows a deduction from the gross total income of the entire profits derived from export of goods other than minerals. Finance (No.2) Act, 1991 extended the benefit to export of processed minerals and ores mentioned in the Twelfth Schedule to the Income- tax Act. Item (x) of the Schedule mentions “cut and polished minerals and rocks including cut and polished granite”. Some organisations and individual taxpayers have raised doubts whether the deduction under section 80HHC is available in respect of export of granite or other rocks that are cut and exported as raw blocks after being washed and cleaned. The entry in the Twelfth Schedule is very clear and unambiguous and uses the term “cut and polished”. Therefore, for availing of the benefit under section 80HHC, it is necessary that the rock is not only cut into blocks but also polished before it is exported.

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 7/13 This is in line with Government's policy to encourage export of polished granite and other rocks where value addition before export is high and to discourage export of raw blocks where value addition is low.” 12.In the present case, it is to be seen whether conditions included in the 12th Schedule, reiterated in Circular No.693, being 'cutting and polishing' have been fulfilled. 13.The case of the Revenue is that the assessees have exported marble blocks after cutting but without polishing and the assessees have not supported contention of polishing as per their Books of Accounts. In the case of CIT v. God Granites (supra) words “cutting and polishing” have been interpreted and it was observed by the Hon'ble Karnataka High Court as under: “Under the Twelfth Schedule what is required is only cut and polished minerals including granites should be exported for entitlement to deduction u/s 80HHC. In the explanation to the Twelfth Schedule 'processed' has been defined to mean in relation to any mineral or ore mentiioned in items (a) to (h). The Act does not prescribe the degree or extent of cutting and polishing to be applied to granite ores or boulders. Any proces applied to the rough mineral, which adds value to the marketable commodity would create an eligibility for deduction. When rough granites are cut into dimensional blocks of uniform colour and size and also certain amount of dressing and polishing which would remove various natural flaws such as colour variations etc would certainly amount to processing of the granite and adds value to its marketability.

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 8/13 The Act does not specifically say that the minerals and granites should be given the final cut and be finally polished before they are exported. If such a view is taken the purpose of allowing the benefit to cut and polished minerals include granite blocks towards deduction u/s 80HHC would get frustrated. It is ultimate user of the granite who would determine the shape, size and thickness of the granite blocks to be used by them and hence it is required that the final cutting of the granite blocks would have to be taken at their end. The same consideration would apply to the final polishing. The extent of final polishing required to granite blocks would depend on their actual use.” 14.In the present case, the Assessing Authority has disallowed the benefit of deduction under sec.80HHC of the Act by observing that the bills raised by the assessees used term “dressed marble blocks” and in reality, the blocks were neither cut in uniform dimensional size nor polished. The ultimate cutting and polishing is to be done by the end user, so there is no logic behind marble blocks cut and polished before export. Thus, a finding was given that the export of the marble blocks by the assessee is not eligible for the deduction under sec.80HHC of the Act and claim of the assessees under sec.80HHC of the Act was disallowed. 15.The Commissioner of Income-tax (Appeals) allowed appeals of the assessees by observing that as the marble is a mineral, cut and polished marble blocks shall be covered by Entry (x) in the 12th Schedule, the assessees have filed copies of invoices, certificates etc

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 9/13 in support of polishing and value addition and hence, deleted disallowance/addition made by the Assessing Authority on this point. 16.The Revenue thereafter took the matter further before learned Income-tax Appellate Tribunal but the learned ITAT dismissed appeals of the Revenue on those grounds and averments and on the finding of learned Commissioner of Income-tax (Appeals) upheld claim of the assessee-respondents for allowing deduction under sec.80HHC of the Act. 17.Thus, two appellate authorities below have concurrently held in favour of assessee-respondents that there was no breach of any of the conditions of sec.80HHC of the Act for grant of said benefit to the assessees. The fact remains that the assessees exported marble blocks, which were cut and polished and thus, satisfied requisite conditions for grant of benefit of deduction under sec.80HHC of the Act during the relevant years. 18.In the backdrop of these findings of facts, it is clear that the marble blocks come under the purview of Item (x) of the 12th Schedule and the assessees had produced vouchers, invoices, certificates for cutting and polishing of the exported marble blocks having fulfilled the conditions included in the 12th Schedule along with Circular No.693. Under the 12th Schedule, what is required is that only cut and marble blocks should be

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 10/13 exported for entitlement to deduction under sec.80HHC of the Act. 19.The Act does not prescribe the degree or extent of 'cutting and polishing' to be applied to the marble blocks. Any process applied to the rough mineral, which adds value to marketable commodity would create an eligibility for the benefit of deduction. When rough marble is cut into dimensional blocks of uniform colour and size and also certain amount of dressing and polishing, which would remove various natural flaws such as colour variations etc, it would certainly amount to 'processing' of the marble and adds value to its marketability. The Act does not specifically mentioned that the marble should be given final cut and final polish before being exported. If such a view is taken, the purpose of allowing the benefit to 'cut and polished mineral rocks' towards deduction under sec.80HHC of the Act would get frustrated. 20.From the facts of these cases, it is also clear that after undergoing the process of cutting and polishing, export of marble blocks fetched profit at higher rate, which is clearly high value addition and hence, the benefit of deduction under sec.80HHC of the Act during the relevant assessment years claimed by the assessees cannot be denied in view of decision of Karnataka High Court in CIT v. God Granites (supra), which has also been affirmed by Hon'ble Apex Court in CIT v. God Granites (supra).

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 11/13 21.Learned counsel for the assessee-respondents also submitted that the High Court cannot go into questions of facts of the case and the appellant-Revenue has not taken contention that the findings arrived by the learned Tribunal on facts was perverse. In support of their contention, learned counsels relied on decision of Hon'ble Apex Court in the case of Sudarshan Silk & Sarees (supra), in which it was held as follows: “... Reversing the decision of the High Court, that the final fact-finding authority was the Appellate Tribunal and its decision on the facts could be gone into by the High Court only if a question had been referred on whether the finding of the Tribunal was perverse, in the sense that it was such as could not reasonably have been arrived at on the material placed before the Tribunal. In the absence of such a question the High Court had to accept the finding of fact arrived at by the Tribunal and then proceed to decide the question of law referred.... The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it whether the finding arrived at by the Tribunal on the facts was perverse in the sense that no reasonable person could have taken such a view.” 22.In the present case, finding of the learned ITAT is in favour of assessee-respondents and it has been categorically held that the assessee-respondents are eligible for deduction under sec.80HHC of the Act for export of marble blocks, which were cut and polished.

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 12/13 This findings are, indisputably, binding on this Court in view of law laid down by Hon'ble Supreme Court in the case of Sudarshan Silk & Sarees (supra). The appellant- Revenue has also not controverted that the findings arrived at by the learned Tribunal on facts are not correct or are perverse. Therefore, the findings of facts arrived at by the learned Income-tax Appellate Tribunal need not be gone into by us. 23.Therefore, we are of considered opinion that the learned ITAT was justified in allowing the deduction under sec.80HHC of the Act regarding export of cut and polished marble blocks during relevant years by the assessee-respondents. The appeals of the Revenue, therefore, are liable to be dismissed and the substantial question of law framed above is accordingly answered in favour of assessee-respondents and against the appellant-Revenue. 24.It is also pertinent to note that since the Circular No.693 dated 17th November 1994 has already been referred to and discussed along with the substantial question of law framed in these appeals, for the second substantial question of law framed in Appeal No.29/2008 regarding legal effect of Circular No.693, it is also held that said Circular does not adversely affect claims of the assessee-respondents and the assessees are entitled to benefit of deduction under sec.80HHC of the Act. Thus, the second substantial question of law framed in Appeal No.29/2008 is accordingly answered in

DBITA No.29/2008 & ors CIT Udaipur v. M/s Arihant Tiles & Marbles Pvt Ltd & ors 13/13 favour of the assessee-respondent and against the appellant-Revenue. 25.In view of the above, these appeals of the Revenue are hereby dismissed. No order as to costs. 26.Registry is directed to place on record a copy of this order in each connected file. [V.K. MATHUR],J. [NARENDRA KUMAR JAIN],J. mma 85-92, 93,94,73