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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI AMARJIT SINGH
Per : Kuldip Singh, Judicial Member:
Since common questions of facts and law have been raised in these inter-connected cross appeals, the same are being disposed of by way of composite order to avoid repetition of discussion.
2. Aforesaid appeals filed by Hindustan Coals Private Limited (hereinafter referred to as ‘the assessee’) for A.Y. 2002-03 to 2018-19 and cross appeals filed by the Dy. CIT, Mumbai (hereinafter referred to as the Revenue) for A.Y. 2012-13 & 2018- 19 sought to set aside the impugned orders dated 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 25.04.2022, 12.05.2022, 12.05.2022, 12.05.2022, 12.05.2022, 26.04.2022 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] [hereinafter referred to as the CIT(A)] qua the assessment years 2012-13 & 2018-19 on identically worded grounds, except the difference in figures of deductions/additions/disallowances (grounds of A.Y. 2002-03 are taken for the sake of brevity) inter alia that: “1. On the facts and circumstances of the case and in law, the Ld. Assessing Officer ("A.O") and the Ld. Commissioner of Income- tax (Appeals) ["CIT(A)"] erred in disallowing the deduction of Rs.2,50,48,599 claimed by the Appellant u/s 80-IB of the Act. 2. On the facts and circumstances of the case and in law, the Ld. A.O. and Ld. CIT(A) erred in holding that the bituminous products produced by the Appellant cannot be regarded as 'mineral oil' for the purpose of Section 80IB(9) of the Act.
3. On the facts and circumstances of the case and in law, the Ld. A.O. and Ld. CIT(A) erred in holding that the production of bituminous products by the Appellant using bitumen cannot be regarded as 'commercial production' for the purpose of Section 80IB(9) of the Act.
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the opinion expressed by the professors of Indian Institute of Technology, Chennai are "general observations" and not "conclusive", when the report is detailed, reasoned and assertive.
5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying upon the opinion expressed by the professors of Indian Institute of Technology, Mumbai, though the opinion is cryptic and not reasoned. In any case, the Ld. CIT(A) erred in not granting an opportunity to the Appellant to cross examine the expert witness whose opinion has been relied upon.
6. On the facts and circumstances of the case and in law, when even as per the Ld. CIT(A), there are two conflicting and contrary opinions, the Ld CIT(A) erred in accepting the view expressed against the Appellant, when he ought to have followed the view expressed in favour of the Appellant.
7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the Notifications/ Circulars/ Judgments referred to and relied upon by the Appellant have already been considered and dis-agreed with by the Hon'ble Income-tax Appellant Tribunal in the first round of appeal, when on facts, the Tribunal has not expressed its opinion on the applicability of the Notifications/ Circulars/ Judgments.
8. On the facts and circumstances of the case and in law, the Ld. C1T(A) erred in holding that the Appellant would not be entitled to deduction u/s 801B(9) of the Act as it is not engaged in refining of mineral oil, when the deduction is available to "commercial production" of mineral oil as undertaken by the Appellant.
9. On the facts and circumstances of the case and in law, the Ld. C1T(A) erred in holding that deduction u/s 801B(9) would not be available to "resultant material or any by product" of production or refining of mineral oil.
10. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that deduction u/s 80IB(9) would not be available for production of one form of mineral oil (bitumen emulsions, cutback bitumen, modified bitumen) from another form of mineral oil (bitumen), when there is no such restriction in the statute.
Commercial production of any form of mineral oil from whatever source would be eligible for the deduction u/s 801B(9).
11. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in disregarding the submissions made by the Appellant on the other issues remanded by the Hon'ble Tribunal to the CIT(A).
12. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the finding of the Ld. AO that the Appellant has engaged less than 10 persons in the manufacturing process.
13. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the finding of the Ld. AO that the 'other income' earned by Appellant is not derived from the undertaking eligible for deduction u/s 801B(9) of the Act.
14. On the facts and circumstances of the case and in law, the Ld. C1T(A) erred in upholding the finding of the Ld. AO that the new undertaking established by Appellant has been set up with plant and machinery which was already used in India, when the plant and machinery were not used by any undertaking other than the eligible undertaking of the Appellant.”
3. The Revenue by filing aforesaid cross appeals for A.Y. 2012- 13 & 2018-19 sought to set aside the impugned orders dated 25.04.2022 & 26.04.2022 on identically worded grounds, except the difference in figures of deduction/disallowances (grounds of A.Y. 2012-13 are taken for the sake of brevity) inter alia that: “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the education cess amounting to Rs.76,21,121/- was an admissible expenditure, without appreciating the fact that education cess is part of tax u/s 40(a)(ii) of the Income Tax Act, 1961 and is not an allowable expenditure, as held by Hon'ble Apex Court in the case of CIT Vs. K. Srinivasan (1972) 83 ITR 346 (SC)". 2. On the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in holding that the assessee is entitled to a refund of dividend distribution tax paid under section 115-O(1) of the Act as dividend distribution tax is not a tax on dividend income of the recipient (being a foreign entity) of dividend income to which the provisions of DTAA are applicable but a tax on income, profits or gains of the dividend distributing Indian company as held in the case of SIDBIv. CBDT[2021] 133 taxmann.com 158(Bom.).
The learned CIT(A)'s order is contrary in law and deserves to be set aside.
4. The appellant prays that the order of the C1T(A) on the above grounds be set aside and that of the AO be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary at the time of hearing.”
Before proceeding further, brief facts necessary for adjudication of the issues at hand are required to be discussed with. Assessee company is a joint venture of Hindustan Petroleum Corporation (HPCL), India and Colas SA, France. HPCL during its refining process of crude oil produces various items like Liquid Petroleum Gas (LPG), petrol, Naphtha, kerosene, diesel, lubricating oil, fuel oil and also produces bitumen. The assessee after purchasing bitumen from HPCL, produces products viz. bitumen emulsion, cut back bitumen, modified bitumen etc. The assessee company by filing return of income claimed deduction under section 80IB of the Income Tax Act, 1961 (for short ‘the Act’) qua its Bahadur Garh plant in Haryana and Irungattukottai palnt in Tamil Nadu. By declining the contentions raised by the assessee, the Assessing Officer (AO) proceeded to disallow the deductions claimed by the assessee under section 80IB by deciding the following broad issues against the assessee inter alia that: I. Is the company engaged in commercial production or refining of mineral oil?
II. Does the assessee engage more than 10 persons in manufacturing process? III. Do the 80IB units satisfy the conditions of new machinery? IV. Is the other income entitled for deduction u/s.80IB?
And thereby framed the assessment under section 143(3) read with section 264 of the Act by making disallowance of deductions claimed by the assessee under section 80IB of the Act.
This is a second round of litigation having been remanded by the co-ordinate Bench of the Tribunal to the CIT(A) to determine the issues afresh after providing opportunity of being heard to the assessee by returning following findings inter alia that; (1) The Ld. CIT(A) is to pass fresh order after obtaining further clarification from Indian Institute of Technology (IIT) Chennai “as to whether assessee is a producer or refinery of mineral oils”.
(2) The Ld. CIT(A) to pass fresh order after further examination of the claim of the appellant by determining the issue if casual workers/contract workers engaged by the assessee are to be considered for the purpose of minimum number of workers in the light of the decision rendered by Hon’ble High Court of Bombay in case of CIT vs. Jyoti Plastic Works Pvt. Ltd. 339 ITR 491; and to decide the issue if the assessee has made use of new plant & machinery in setting up of industrial undertaking as required under section 80IB(2) of the Act.
(3) To determine afresh by the Ld. CIT(A) the eligibility of the assessee in respect of other items of income the details of which have not been given in the light of the decision rendered by Hon’ble Supreme Court in case of Liberty India (supra).
Pursuant to the remand order passed by the co-ordinate Bench of the Tribunal the Ld. CIT(A) passed impugned orders afresh by dismissing the appeals of the assessee. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) assessee has come up before the Tribunal by way of filing present appeals A.Y. 2002-03 to 2018-19 and Revenue has filed cross appeals for A.Y. 2012-13 & 2018-19.
Grounds No.1 to 12 & 14 of assessee’s appeals bearing to 1653/M/2022 for A.Y. 2002-03, 2005-06 to 2014-15, 2016-17 & 2018-19
7. At the very outset, it is contended by the Ld. A.R. for the assessee that out of 14 grounds raised in appeal bearing to 1653/M/2022 for A.Y. 2002-03, 2005-06 to 2014-15, 2016-17 & 2018-19, grounds No.1, 8, 12 and 14 are the effective grounds and rest of the grounds are argumentative and as such need not be specifically taken up for discussion.
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly the assessee company has started its commercial production such as bitumen emulsion, cut back bitumen, modified bitumen etc. in its various plants across India as under:
Sr no. Location of the Undertaking Date of Commencement 1. Vashi Plant in Maharashtra. 1SI March 1996 2. Bahadurgarh Plant in Haryana. 26lh March 1998 3. Irungattukottai Plant in Tamil Nadu. 5th February 2000 4. Savli Plant in Gujarat. 26th January 2003 5. Visakhapattnam Plant in Andhra Pradesh. 22nd May 2004 6. Mangalore Plant in Karnataka. 3 1st December 2004 7. Jhansi Plant on Uttar Pradesh. 27th March 2008 8. Haldia Plant in West Bengal. 28th March 201 2
From the grounds raised, facts, circumstances discussed in the preceding paras and arguments addressed by the Ld. Representatives of the parties to the appeals the sole question arises for determination by the Bench is: “As to whether assessee company being the producer of bitumen emulsion, cutback bitumen, modified bitumen etc. from bitumen purchased from HPCL is engaged in refining/producing “mineral oil” on or after the first day of October 1998 (but not later than the 31st day of March 2012) as required under section 80IB(9) to be eligible to claim deduction under section 80IB of the Act?”
The Ld. A.R. for the assessee challenging the impugned findings returned by the AO as well as the Ld. CIT(A) that processing of modifying bitumen into bitumen emulsion, cut back bitumen etc. is not “mineral oil” rather it is a “residual material” contended inter alia that everything which is produced from distillation of “crude oil” is a mineral as in the case of LPG and petrol which are undisputedly held as “mineral oil”; that bitumen is one of the petroleum products which is made up of “refined crude oil”; that ordinary meaning of “mineral oil” is not confined to “crude oil” rather it covers petroleum products derived from the “crude oil”; that various provisions under Income Tax Act viz. section 44BB, 206C, 293A define “mineral oil” as including petroleum and natural gas etc.; that under The Oil Industry (Development) Act, 1974, The Mines and Minerals (Development and Regulation) Act, 1957, The Mines Act, 1952, The Oil Fields (Regulation and Development) Act, 1948, The Offshore Areas Mineral (Development and Regulation) Act, 2002 & The Companies (Profits) Surtax Act, 1964 “mineral oil” includes petroleum, natural gas; that Hon’ble Bombay High Court in case of Burmah Shell Refineries Ltd. vs. GV Chand ITO (1966) 61 ITR 493 (Bom.) held that expression “mineral oil” is wide enough to include both petroleum as well as the products produced from petroleum by refining, or the products secured from raw petroleum or “crude oil”; that circular No.57 [F.NO.156(26)71 – TPL] dated 23.03.1971 issued by Central Board of Direct Taxation (CBDT) also explained the term “mineral oil” covering both “crude oil” (crude petroleum) and the liquid products derived from crude petroleum which are in the nature of mixture of hydrocarbons namely motor spirits, kerosene and other allied articles; that as per definition of bitumen given in the oxford English dictionary “it is a tar like mixture of hydrocarbons derived from petroleum naturally or by distillation and used for road servicing and roofing. The Ld. A.R. for the assessee also tried to explain that bitumen is a mineral by relying upon scheme of the “crude oil” distillation process of M/s. Crown Oil, a leading UK Petroleum distributor.
The Ld. A.R. for the assessee also relied upon classification of bitumen/asphalt used in the US patent classification definition and further relied upon decision rendered by Hon’ble High Court of Bombay in case of Burmah Shell Refineries Ltd. (supra), decision rendered by Hon’ble Delhi High Court in case of ACIT vs. Distillers Trading Corpn. (1982) 137 ITR 894 (Delhi), decision rendered by Hon’ble Gujarat High Court in case of Niko Resources Ltd. vs. Union of India (2015) 55 taxmann.com 455 (Gujarat), decision rendered by co-ordinate Bench of the Tribunal in case of Indian Oil Corpn. Ltd. vs. DCIT (2005) 4 SOT 1 (Mum) and the decision rendered by co-ordinate Bench of the Tribunal in case of Numaligarh Refinery Ltd. vs. DCIT 2019 SCC Online ITAT 18321.
However, on the other hand, to repel the arguments addressed by the Ld. A.R. for the assessee, the Ld. D.R. for the Revenue relied upon the orders passed by the Ld. CIT(A) and further contended that since bitumen is the last product (residual) from the “crude oil” and assessee has failed to explain as to what he produces out of the bitumen the Ld. CIT(A) has rightly treated the same not as mineral; that in all the cases relied upon by the assessee bitumen has not been discussed and held as “mineral oil” and specifically relied upon the report given by IIT Bombay.
AO as well as Ld. CIT(A) have arrived at the conclusion that bitumen emulsion cannot be classified as a “mineral oil” primarily by relying upon the report given by IIT Mumbai, available at page 206 of paper book, which is extracted as under for ready perusal:
At the same time the assessee during first appellate proceedings also called an opinion of IIT, Chennai, India qua “as to whether bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. can be described and classified as “mineral oil” which is available at page 201 to 205 of the paper book and is extracted as under for ready perusal:
Aforesaid opinions rendered by IIT Mumbai and IIT Chennai being diametrically opposed to each other, thus we are unable to reach a definite conclusion if bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. can be described and classified as “mineral oil”. Even otherwise ultimately question framed is to be determined by the Bench on the basis of facts and circumstances brought on record in the light of supporting case laws canvassed by the authorized representatives of the parties to the appeals in view of the settled principle of law that court is expert of experts.
No doubt the expression “mineral oil” has not been specifically defined anywhere in the Act, but for the purpose of section 80IB CBDT issued a circular No.57 (supra) wherein the issue sought to be addressed was:- “whether a company carrying on the business of refining crude oil into motor spirit, aviation spirit, kerosene and allied articles can be said to be engaged in the manufacture or production of "mineral oil" for purposes of calculating the super tax rebate under the Finance Act, 1964 and the Finance Act, 1965?”
Circular No.57 (supra) issued by CBDT is extracted for ready perusal as under: “SECTION 80-I OF THE INCOME TAX ACT, 1961 – DEDUCTIONS – PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS, ETC AFTER CERTAIN DATES – BUSINESS OF REFINING OF CRUDE OIL- WHETHER IT WILL BE REGARDED AS PRIORITY INDUSTRY FOR THE PURPOSES OF DEDUCTION UNDER THE SECTION Circular : No. 57 [F. No. 156(26)/71 - TPL], DATED 23-3-1971. A question has been raised whether a company carrying on the business of refining crude oil into motor spirit, aviation spirit, kerosene and allied articles can be said to be engaged in the manufacture or production of "mineral oil" for purposes of calculating the super tax rebate under the Finance Act, 1964 and the Finance Act, 1965. The Board have been advised that the term "mineral oil" covers both crude oil (crude petroleum) and the liquid products derived from crude petroleum which are in the nature of mixtures of hydrocarbons, namely, motor spirit, kerosene and other allied articles. It, therefore, follows that the profits and gains attributable to the business of refining of crude oil would qualify for higher rebate in respect of super tax available in relation to the profits and gains attributable to the business of manufacture and production of mineral oil under the Finance Act, 1964, and the Finance Act, 1965, provided the other conditions specified in this behalf are fulfilled.
On a parity of reasoning, the business of refining of crude oil will be regarded as priority industry for purposes of section 80-I and section 80M and also as business of manufacture or production of mineral oil, for purposes of calculating the development rebate in respect of machinery and plant under section 33.”
At the very outset, we would examine from Pictorial representations of fractionating column from shell bitumen referred by the Ld. A.R. for the assessee to canvass his contentions that bitumen is a petroleum product arisen out of “crude oil” distillation process, available at page 14 & 15 of the written submissions filed by the assessee, which is as under:
Bare perusal of process of fractional distillation depicted in the pictorial representation extracted in the preceding para No.18 explains that when “crude oil” is processed through distillation process with other fundamental refining processes such as reforming and cracking for the manufacture of salable products, liquid petroleum gas, gasoline, aviation fuel, kerosene for lighting, diesel, lubricating oil, fuel oil and bitumen is produced. Scientific process of fractional distillation of “crude oil” is not in dispute.
When we examine the term “petroleum products” it’s simple definition is all petroleum products including bitumen are obtained through the refining of “crude oil”. We can put it in other words that petroleum is a broad term encompassing the “crude oil” as well as products derived therefrom as is depicted in the pictorial diagram extracted in preceding para No.18.
The Ld. A.R. for the assessee also drew our attention towards website of Crown Oil, a leading UK distributor which defines petroleum as under: “Petroleum is a broad term that refers to both crude oil and petroleum products. Petroleum products are the different hydrocarbons groups that occur within crude oil, and they are obtained through the refinement of crude oil.”
The Ld. A.R. for the assessee in order to explain further that bitumen is a petroleum product, hence a mineral, drew our attention towards website of US Energy Information Administration which defines petroleum as explained at page 15 of the written submissions, extracted for ready perusal as under: “11.2 Website of the U.S. Energy Information Administration defines Petroleum-https:/www.eia.gov/tools/faq.php?id=40&t=6 follows (Pg 52 of Paperbook Volume V): Crude oil is a mixture of hydrocarbons that exists as a liquid in underground geologic formations and remains a liquid when brought to the surface. Petroleum products are produced from the processing of crude oil and other liquids at petroleum refineries, from the extraction of liquid hydrocarbons at natural gas processing plants, and from the production of finished petroleum products at blending facilities. Petroleum is a broad category that includes both crude oil and petroleum products. The terms oil and petroleum are sometimes used interchangeably.”
Aforesaid definitions given by the US Energy Information Administration again explain that “crude oil” is a mixture of hydrocarbons, from whose distillation process various petroleum products are produced. Meaning thereby petroleum is a broad category that includes both “crude oil” and petroleum products.
Furthermore, when we examine CBDT circular No.57 (supra) which was issued in order to clarify the question:- “as to whether a company carrying on the business of refining crude oil into motor spirit, aviation spirit, kerosene and allied articles can be said to be engaged in the manufacture or production of “mineral oil”?”
It is observed that the term “mineral oil” covers both “crude oil” (crude petroleum) and the liquid products derived from crude petroleum which are in the nature of mixture of hydrocarbons namely motor spirit, kerosene and other allied articles. From CBDT circular No.57 (supra) it has become apparent that liquid products derived from crude petroleum (“crude oil”) are in the nature of hydrocarbons namely motor spirit, kerosene and other allied articles. It is further explained by CBDT circular No.57 (supra) that “the business of refining of “crude oil” will be regarded as business of manufacture or production of “mineral oil” for the purpose of calculating the development rebate in respect of machinery and plant.
The Ld. A.R. for the assessee further relied upon section 2 of The Oil Industry (Development) Act, 1974 to define the term “mineral oil” which is extracted as under: “Section 2 – (h) “mineral oil” includes petroleum and natural gas; (m) “petroleum product” means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas gasoline, naphtha, distillate gasoline, kerosene, bitumen, asphalt and tar, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by- products derived from oil or gas and blends or mixtures of two or more liquid products or by-products derived from oil condensate and gas or petroleum hydrocarbons not specified hereinbefore;”
Under section 2(jj) of The Mines Act, 1952 “mineral oil” means all substances which can be obtained from the earth by mining, digging, drilling, dredging, hydraulicing, quarrying or by any other operation and includes “mineral oil” (which in turn include natural gas and petroleum). Under section 3(b) of The Mines and Minerals (Development and Regulation) Act, 1957 “mineral oil” includes natural gas and petroleum.
Likewise under section 4(m) of The Offshore Areas Mineral (Development and Regulation) Act, 2002 “mineral oil” includes natural gas and petroleum. Under section 3(c) of The Oil Fields (Regulation and Development) Act, 1948 “mineral oil” includes natural gas and petroleum. Under section 24AA explanation to The Companies (Profits) Surtax Act, 1964 again “mineral oil” includes petroleum and natural gas.
Furthermore, the Ld. A.R. for the assessee relied upon the decision rendered by the Hon’ble Bombay High Court in case of Burmah Shell Refineries Ltd. (supra) wherein issue came up before the Hon’ble High Court “as to whether petitioner who is engaged in refining of “crude oil” is doing the business of manufacture or production of “mineral oil” so as to be eligible for a higher rebate of income tax as provided in Finance Act, 1964. Hon’ble High Court decided the issue as under: “The learned Advocate-General, who appears for the petitioner, contends that the petitioner-company was at the material time engaged in manufacture or production of mineral oil and therefore was entitled to rebate at 35 per cent. The Income-tax Officer was clearly in error in not allowing rebate at the rate of 35 percent. The mistake is apparent on the face of the record and therefore should be rectified. Secondly, he contends (hat at any rate the petitioner- company had been claiming in its return and the accompanying accounts as well as other documents that the company was engaged in the business of manufacture or production of mineral oil, and therefore the Income-tax Officer was bound to proceed in making a provisional assessment on that basis and assess the assessee- company on the footing that it was engaged in the business of manufacture or production of mineral oil. In proceeding to hold the contrary to the case put forward by the petitioner-company, the Income-tax Officer has acted in excess of his jurisdiction. The Advocate-General also argued that on the averments made by the first respondent in his affidavit in reply to the petition, the first respondent has not denied that the petitioner was a company engaged in the business of manufacture or production of mineral oil, nor has the first respondent denied that the petitioner-company had claimed that it was a company engaged in the manufacture or production of mineral oil. Thus, according to the Advocate- General, the admitted position was that the petitioner was a company engaged in the business of manufacture or production of mineral oil. The Income-tax Officer was therefore in error in granting rebate only at 30 per cent, and not at 35 per cent. Mr. Joshi, learned counsel for the revenue, on the other hand, contends that the petitioner is not a company engaged in the manufacture or production of mineral oil. On the other hand, the petitioner is a company doing business of refining crude oil. It is the argument of Mr. Joshi that the expression "mineral oil" means crude oil and not its products. Crude oil is supplied to the petitioner. The petitioner is not either manufacturing or producing crude oil. Crude oil is imported from abroad or is brought from Ankleshwar. The petitioner only by refining the crude oil manufactures the products from the crude oil. The business of the petitioner- company therefore is not either the manufacture or the production of crude oil. The Income-lax Officer therefore was right in granting rebate at 30 per cent. It is also the argument of Mr. Joshi that nowhere, either in the return or in the accounts or the documents which have been filed by the petitioner along with its return, any claim was made by the petitioner that it was a company engaged in the business of manufacture or production of mineral oil. It is only after the assessment had been completed that the petitioner for the first time in its application dated 21st October, 1965, for rectification has claimed that it was a company engaged in the manufacture or production of mineral oil. That letter is of no relevance. According to Mr. Joshi no claim was made at the lime of the assessment either in the return or in the documents accompanying it. The Income-lax Officer therefore was entitled to deduce on the material before him as to whether the petitioner was a company engaged in the business of manufacture or production
of mineral oil, and he has decided that the petitioner-company was not so engaged. There is no error therein.
The first question that arises is whether it could at this stage be said that the company prima facie appears to have been engaged in the business of manufacture or production of "mineral oil" or whether it could at this stage be said that the company prima facie does not appear to have been so engaged. We are formulating this question in this manner because, in our opinion, it would not be legitimate for us a! this stage to decide the question one way or the other finally as further debate on the question would be permissible under law at the stage of final assessment after full inquiry into facts. It cannot be lost sight of mat we are dealing with a writ petition, wherein a provisional assessment order has been impugned. The provisional assessment order has no binding effect. As we would be presently showing, the provisional assessment order is made without hearing the parties and without there being any inquiry preceding it. The mailer still has to be gone into at the time of the final assessment proceedings when the parties would have an opportunity of leading evidence, fully stating their case before the Income-tax Officer and arguing their case. The assessee would be having a further right of appeal before the income-tax authority, viz., the Appellate Assistant Commissioner, and would also have a right of second appeal before the Income-lax Tribunal, and ii is only ultimately when the facts are finally found by the Tribunal that the matter would be coming before this court in a reference in accordance with the procedure which has been prescribed by the Income-tax Act. We have at this stage to see whether the matter is abundantly clear one way or the other.
The expression "mineral oil" has not been denned anywhere in the Act. In Webster's Third New International Dictionary (volume II, page 1438), the meaning of "mineral oil" has been given as: "Mineral oil. n.: a liquid product of mineral origin that is within the viscosity limits recognised for oils (as petroleum, shale oil, or any oil obtained from them by refining), esp. liquid petroleum —compare Hydrocarbon oil, Paraffin oil."
In Oxford English Dictionary, edited by Murray (volume 6, page 467), the meaning of "mineral oil" is given as : "Mineral oil —a general name for petroleum and the various oils distilled from it."
In Petroleum Dictionary by Lalia Phipps Boone (page 199) the meaning is: "Mineral oil" I .Crude petroleum and its products. 2.Liquid petroleum.
In the Illustrated Petroleum Dictionary and Products Manual— cornet A and edited by the editorial staff of the Petroleum Educational Institute (page 269) the meaning is :
"Mineral oil,—Petroleum as it comes from the ground is frequently called mineral oil because it comes from a mineral surrounding ; also to distinguish it from oil secured from vegetable and animal sources. It may refer to (I) crude oil coming naturally from the ground or secured from coal, shale or any other natural source ; (2) any one of the many products secured from the crude oil or secured from coal, shale or other natural sources."
From the meaning of the word "mineral oil" as given in Webster's and Oxford Dictionaries as well as in the technical dictionaries, viz., the Petroleum Dictionary and the Illustrated Petroleum Dictionary, it is clear that the expression "mineral oil" is wide enough to include both the petroleum in its crude form as well as the products secured or obtained from the crude oil by refining. We have already stated that in the petition the business of ihe petitioner-company has been given as "refining crude oil". The dictionary meaning of the word "crude oil" in Webster's Dictionary (page 546), (volume I) is :
"Crude oil or crude petroleum, n. : petroleum as it occurs naturally, as it comes from an oil well, or after extraneous substances (as contained water, gas and minerals) have been removed."
In the Illustrated Petroleum Dictionary and Products Manual—by Petroleum Educational Institute, California—it has been mentioned: "Crude oil.—Set petroleum.
Petroleum.- describes crude oil as it comes from the ground in its natural state or when secured from coal, shale and other sources. Its origin is not definitely known. The word is derived from the two Latin words, petra, meaning rock and oleum meaning oil and frequently called rock oil or earth oil. Sometimes found oozing from the surface and called seepage, but usually found far below the surface and in every continent on earth. Also known as mineral oil, crude oil and crude naphtha." (page 311).
In the Petroleum Dictionary by Lalia Phipps Boone (page 104), it has been mentioned :
"Crude mineral oil —petroleum. Designated crude to distinguish it from the refined oils manufactured from it.
Petroleum, n. : An inflammable liquid, oily mixture of a great many hydrocarbons found in the earth. The quality and quantity of the deposits of pools vary almost as widely as the localities in which they are found."
The same dictionary also gives so many other names by which petroleum is referred to, such as black gold, black gold of Transylvania, blackjack, black oil, etc. Reading the aforesaid definition of "crude oil" it is apparent that petroleum as it comes from the ground is generally understood or generally referred to as crude oil and the expression "mineral oil" is wide enough to include not only the crude oil but also any oil obtained from it by refining, or any products secured from the crude oil.
We have already stated that the combined effect of the various provisions of the Act to which we have already made reference is that if the company is engaged in doing the business of manufacture or production of mineral oil, then it is entitled to 35 per cent, rebate. We have referred to the meaning given to the terms "mineral oil" and "crude oil" in the aforesaid dictionaries, which indicate that the crude oil means petroleum in its raw form as it comes from the ground, and the expression "mineral oil" is wide enough to include both petroleum as well as the products produced from petroleum by refining, or the products secured from raw petroleum or crude oil. Prima facie, therefore, the company appears to have been engaged in the business of manufacture or production of "mineral oil". Mr. Joshi, however, has argued that it may be that the expression "mineral oil" by itself may have a wider meaning by including both petroleum and petroleum products, but in the context in which ii has been used it must be given the limited meaning of petroleum or crude oil. The argument of Mr. Joshi is that the expression "mineral oil" has to be understood in the limited sense in view of the words that precede it in the third item of the list of articles and things in Part III. He contended that all the articles preceding, such as coal, lignite, iron ore, bauxite, manganese ore, dolomite, limestone and magnesite, precede the words "mineral oil". All these articles or things are raw materials; the expression "mineral oil" therefore must be understood as referring to the raw material, viz., crude oil or petroleum and not its finished products. It is difficult to accept the interpretation which Mr. Joshi wants us to put on this expression, especially because when we read other items in the list of articles and things appearing in the various clauses of Part III, we do not find that the intention" of the legislature was to restrict the benefit only where raw material was produced or extracted. For instance, look at item No. 1 which is iron and steel, ferro-alloys and special steels. Clearly, steel, ferro-alloys and special steels are not articles which could be termed as raw material. However, as already staled, it is not necessary at this stage to go into detail in this matter. Suffice it to say that it is difficult by merely reading item No. 3 to hold that the legislature intended to restrict the meaning of the word "mineral oil" to "crude oil". There is also another difficulty in the way of Mr. Joshi and that is the language used in the relevant provisions. The language used is "On so much of the total income as consist of profits and gains attributable to the business of manufacture or production of mineral oil." According to Mr. Joshi the rebate of 35 per cent, is allowable only to such companies which do the business of extracting crude oil from earth and not to companies that do the business of refining. If we accept that contention it would be completely rendering the word "manufacture" redundant. The rebate is allowable to a company that does the business either of manufacture or production of mineral oil. Prima facie "manufacture of mineral oil" could mean mineral oil produced by refining process from crude oil. Both crude oil as well as products produced from it have its origin in or have its basic substance as mineral oil. It has also been argued by Mr. Joshi that wide words used in the statute have to be understood in the limited sense in order to give effect to the true intention of the legislature. According to Mr. Joshi, the concession provided by the aforesaid relevant provisions of the Act are concessions provided for those companies which produce the raw material of which India is in need, and therefore the meaning of the word "mineral oil" will have to be construed as confined to the crude oil. He read to us certain passages in support of his contention that the words of the statute have not to be construed in the abstract but in the context of the intention of the legislature. He referred us to Maxwell and certain observations in Bradlaugh v. Clarke [1883] 8 App. Cas. 354, as well as certain observations in Halsburry's Laws of England in support of his contention. The proposition is well known, but the question that has to be considered is: what exactly is the intention of the legislature. Is it clearly the intention of the legislature that it intended to grant some benefit and thus encourage companies that were producing raw material? It would equally be said that the intention of the legislature was to grant certain concessions and thus encourage certain companies that would produce goods or manufacture goods which are essential for me basic needs of India, in other words, which would produce or manufacture basic goods. However, as we have stated already, we are not finally deciding the matter. Suffice it to say that it is not impossible to say with certainty that the petitioner-company is not engaged in the business of manufacture or production of mineral oil. On the other hand, the contention of the petitioner that it is engaged in the business of manufacture or production of mineral oil prima facie appears to be well founded. The question is one of considerable difficulty requiring thorough investigation into facts, particularly as to the exact nature of the goods that are produced by the refining process in which the petitioner-company is engaged, what exactly is the nature of the business of the petitioner-company, and various other things. These matters could be gone into only when the proceedings for final assessment would commence.”
However, on the other hand, the Ld. D.R. for the Revenue relied upon the findings returned by the Ld. CIT(A) that “bitumen is already a by-product of “crude oil”, hence further processing of this by-product of “crude oil” does not qualify to be a “mineral oil” for the purpose of deduction under section 80IB” and also relied upon the decision rendered by Hon’ble Bombay High Court in case of Caltex India Ltd. 177 ITR 279. The Ld. D.R. for the Revenue further contended that the view taken by the Hon’ble Bombay High Court in Burmah Shell Refineries Ltd. (supra) case was tentative because the court was dealing with a writ petition which impugned a provisional assessment order. The Ld. CIT(A) extracted the findings returned by Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) was tentative because the court was dealing with a writ petition which impugned a provisional assessment order.
The Ld. CIT(A) while relying upon the decision rendered by Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) again reached a conclusion that the bitumen is not a “mineral oil”, and the view taken by the Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) was tentative having been dealt with in a writ petition by returning the following findings: “Here I may refer to the decision of the Hon'ble Bombay HC in the case of Caltex India Ltd., 177 ITR 239, wherein the Court has held that, "The view expressed in the circular is also the tentative view taken by this court in Burmah Shell Refineries Ltd. v. G. B Chand, lTO [1966] 61 ITR 493. It was argued there on behalf of the Revenue that the expression "mineral oil" in the said item (3) had to be understood in a limited sense in view of the words that preceded it, all these
were raw materials and the expression "mineral oil" had, therefore, to be understood as referring to the raw material, i.e., mineral oil, crude oil or petroleum, and not its finished product. The court took the view that the manufacture of mineral oil would include mineral oil obtained1 by a refining process from crude oil. This view was tentative because the court was dealing with a writ petition which Impugned a provisional assessment order and the parties were entitled to lead evidence".
We have gone through the decision rendered by Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) wherein the Hon’ble Bombay High Court applied the principle of “Noscitur a Sociis” and denied the relief claimed by the assessee under section 80IB of the Act, however, approved the meaning of “mineral oil” given in the case of Burmah Shell Refineries Ltd. (supra) by returning following findings:
“6. It was contended by Mr Jetlev. the_ learned counsel for the revenue, that the expression 'mineral oil' in the said item (3) must be read in the context of the other articles set out therein and should not be given an extended meaning so as to cover lubricating oil. On the other hand, it was contended by Mr. Munim on behalf of the assessee that lubricating oil was commonly understood to be ^mineral oil and it, therefore, fell within the said item (3). He referred to the Tribunal's order in this behalf.
The items mentioned in the said item (3) are minerals or metallic ores or stone, all available within or on the surface of the earth. Mineral oil is extracted from the bowels of the earth, but it also bears the wider meaning canvassed for by the assessee. To the expression mineral oil in the said item (3), however, the doctrine that analogous words take their colour from each other ('noscitur a sociis') must apply and its meaning must be restricted, having regard to the minerals, metallic ores and stone, viz., coal lignite, iron ore, bauxite, manganese ore, dolomite, limestone and magnesite, that also appear therein, to oil that is extracted from the earth. In other words, the said item (3) must be held to cover only the stated articles and not what may be made by using them, whether by manufacture or processing or blending.
8. Our attention was drawn to a circular dated 23-3-1971 issued by the CBDT (Circular No. 57) in the context of whether the business of refining crude oil could be regarded as a priority industry for the purposes of deduction under section 80-
1. 1. The__circular states that the CBDT had been advised that the term 'mineral oil' covers both crude oil (crude petroleum) and the liquid products derived from crude petroleum which are in the nature of mixtures of hydrocarbons, namely, motor spirit, kerosene and other allied articles. It, therefore, follows that the profits and gains attributable to the business of refining of crude oil would qualify for the higher rebate under section 80-1.
9. The view expressed in the circular is also the tentative view taken by this Court in Burmah Shell Refineries Ltd. v. G.B. Chand, ITO [1966] 61 ITR 493. It was there argued on behalf of the revenue that the expression 'mineral oil' in the said item (3) had to be understood in a limited sense in view of the words that preceded it; all these were raw materials and the expression mineral oil had, therefore, to be understood as referring to the raw material, i.e., mineral oil, crude oil or petroleum, and not its finished product. The Court took the view that the manufacture of mineral oil would include mineral oil obtained by a refining process from crude oil. This view was tentative because the Court was dealing with a writ petition which impugned a provisional assessment order and the parties were entitled to lead evidence.
10. Neither the said circular nor this Court's tentative view assist the assessee. The facts found show that the assessee blended straight mineral base oil with some 18 chemicals besides different dyes, vegetable based oils and silicones. The assessee's end-product was, therefore, not mineral oil, as extracted or refined. It was not a mixture of hydrocarbons. It did not, therefore, fall within the meaning of the expression mineral oil as used in the said item(3).”
Furthermore, in case of Caltex India Ltd. (supra) Hon’ble Bombay High Court denied the relief to the assessee on facts by holding that “assessee blended straight mineral based oil with some 18 chemicals besides different dyes, vegetable based oils and silicones as such assessee’s end product in that case was therefore not mineral as extracted or refined”. At the same time, the Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) observed that on standalone basis the term “mineral oil” has wider meanings, which cannot be limited to “crude oil”. So the reliance placed by Revenue on decision rendered by Hon’ble Bombay High Court in case of Caltex India Ltd. (supra) to deny the relief to the assessee is misplaced. Because, assessee’s end product was blend of mineral based oil with some 18 chemicals including vegetables based oils and silicones and was not a mixture of hydrocarbons only. In case of Caltex India Ltd. (supra) the principle of Noscitur a Sociis was invoked to decide the issue against the assessee.
We have also examined the reports submitted by IIT Bombay and IIT Chennai, extracted in the preceding para No.14, with the assistance of the Ld. Authorised Representatives of parties to the present appeals. IIT Bombay opined that product sold by the assessee company namely bitumen emulsion, cut back bitumen, modified bitumen etc. are not “mineral oils” because as per standard literature the findings of “mineral oil” is as follows:
“Mineral oil is petroleum by-product, produced by fractional distillation of crude oil. Mineral oils have cyclic and alkane components. Mineral oils are often the base stock or base oil in a lubricant, hydraulic fluid or heat transfer fluid formulations.”
We are of the considered view that the IIT Bombay has not examined the issue scientifically by answering a question that bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. are not “mineral oils”, without going into the fact if bitumen falls in the category of petroleum by-products. In other words we can call the report given by IIT Bombay a cryptic one which is devoid of scientific reasons. So the view taken by IIT Bombay is also of no support to decide the issue in question “if bitumen is a ‘mineral’ ”.
Then we have gone through the report given by IIT Chennai extracted in the preceding para No.15. The questions posed to the IIT Chennai are inter alia that: “As to whether bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. (subject products) are liquid products derived from “crude oil petroleum” and are in the nature of hydrocarbons”; “Whether subject products can be described and classified as “mineral oils” as per definition given by CBDT; and that whether the process of producing bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. should be called as refining of “crude oil”/bitumen or it should be called as production using bitumen as raw material?”
In answer to the first query, IIT Chennai observed that bitumen, bitumen emulsion are liquid products derived from crude petroleum and are in the nature of mixture of hydrocarbons and further observed that bitumen and bitumen emulsion having their origin from crude petroleum are in the nature of mixture of hydrocarbons. However, at the same time IIT Chennai observed in the concluding para that “since the physical characteristics have changed, it is doubtful whether the modified binders like bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. could be classified as “mineral oils”. At the same time it is also observed by IIT Chennai that the process of producing bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. cannot be called as refining of “crude oil”/bitumen rather it should be called as production of value added, application of specific products using bitumen as raw material (however, this question was not required to be answered by the IIT Chennai but has to be decided firstly by the Revenue and then by the Tribunal in the light of the section 80IB(2) explanation 1 of the Act read with section 80IB(9) of the Act.
We are of the considered view that report given by IIT Chennai can be read to the extent of corroborating the fact that bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. are liquid products derived from crude petroleum and are in the nature of mixture of hydrocarbons.
The Ld. A.R. for the assessee drew our attention towards chapter 23 on pavement materials prepared by the National Broker Technology Enhanced Learning (NBTEL), a project funded by Ministry of Human Resources and Development (MHRD), Government of India, initiated by seven IITs of Bombay, Delhi, Chennai, Kanpur, Kharagpur, Guwahati and Roorkee along with Indian Institute of Science, Bangalore, wherein bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. are described as different forms of bitumen in their civil engineering course. From these observations it can be safely ensured that the assessee after purchasing the raw bitumen from HPCL produces the bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. which is a production and not refining of “crude oil”/bitumen as observed by IIT Chennai.
The Ld. A.R. for the assessee also relied upon the decision rendered by co-ordinate Bench of the Tribunal in case of Numaligarh Refinery Ltd. vs. DCIT 2019 SCC Online ITAT 18321 and Reliance Industries Ltd. vs. ACIT in for A.Y. 2013-14 order dated 10.11.2020 wherein question to be determined was – “As to whether production of motor spirit by refining Naptha would be eligible for examination under section 80IB(9) of the Act claimed to be a “mineral oil”?”
The co-ordinate Bench of the Tribunal by relying upon the decision rendered by Hon’ble Bombay High Court in case of Burmah Shell Refineries Ltd. (supra), the order passed by co- ordinate Bench of the Tribunal in case of India Oil Corporation Ltd. vs. DCIT (2005) 04 SOT 1, Mumbai reached the conclusion that the “mineral oil would include petroleum and petroleum products”. Hence, producing of motor spirit from Naptha is entitled for benefit under section 80IB(9) of the Act by returning the following findings: “9.... The issues of disputes in respect of the claim of the assessee are,(i) whether the raw material 'Naphtha' processed by the new unit falls within the definition of 'Mineral oil' and (2) whether the process of conversion of 'Naphtha' to gasoline and other products falls within the meaning of 'refining’? We note that both the terms are not defined in section 8oIB(9) of the Act and hence the meaning of the words has to be derived from other sections of the Act, definitions given in other statutes and from common parlance meaning. 12...... We note that from the above definitions, it is abundantly clear that 'naphtha' is a 'petroleum product' or 'petroleum' and as 'petroleum ' and 'petroleum product' fall within the definition of 'mineral oil', therefore the assesses company is, entitled to benefit of deduction u/s 8QIB(9)(iii) of the Act. 16........ Therefore, there is no Justification of giving narrower meaning of the words 'mineral oil'. For that we rely on the judgment of the Hon'ble Bombay High Court in Burmah Refineries Ltd reported in 61 ITR 493 (Bom) wherein the court was construing the meaning of the expression 'mineral oil' in a different context, actually, the decision fully supports the stand taken by the assesses company. The Hon 'ble High Court categorically observed in page 501 (from 501 to 503 discussed) of the order that, "it is clear that the expression 'mineral oil' is wide enough to include both, the petroleum in its crude form as well as the product secured or obtained from the crude oil by refining. In this case, the Revenue contended that the petitioner company was not a company engaged in the manufacture or production of mineral oil. On the other hand, it is contended that the petitioner company is a company doing business of refining crude oil. The argument of the Revenue was that the expression 'Mineral Oil' means crude oil and not its product". In para 9 of the order, the Hon 'ble High Court observed that the expression 'Mineral Oil' has not been defined anywhere in the Act......
Similarly, in case of Indian Oil Corporation v, DC1T, (2005) 4 SOT 1 (Mum) the Coordinate Bench of Mumbai Tribunal has held that petroleum products manufactured by the assessee, namely, naphtha, diesel and fuel oil fall under the expression 'mineral oil' and do not qualify for deduction u/s 80HHC. Though the decision was relating to section 80HHC, the Tribunal discussed the meaning of 'mineral oil' which is also not defined in section 80HHC. …. 18.... Therefore, the meaning of 'mineral oil' deserved to be considered in a wider manner. Moreover, the meaning of refining should be construed in the context of a refinery and it should not be restricted lo simple purification process as opined by the Id AO and upheld by the Id CIT(A). The Id AO and the Id CIT(A) has held that 'Naphtha’, the raw material used by the M S Plant is a 'Petroleum Product'. The 'Mineral oil' would include petroleum and petroleum products.”
When we refer back to the Pictorial Diagram of Fractionating Colum extracted in preceding para No.18 as to how many petroleum products are produced from the refining and distillation of the “crude oil”, the order passed by co-ordinate Bench of the Tribunal in case of Numaligarh Refinery Ltd. (supra) is helpful to determine the question if bitumen being a petroleum product falls in the category of “mineral oil”. The co-ordinate Bench of the Tribunal in case of Indian Oil Corporation Ltd. (supra) also dealt with the issue if Naptha, diesel and fuel oil fall under the expression “mineral oil” and answered the question in affirmative by returning following findings: "21. We have given a very careful consideration to the rival submissions made before us vis-a-vis the facts of the case and have gone through the relevant Bombay High Court decisions in the case of Caltex (India) Ltd. (supra) and Burmah Shell Refineries Ltd.'s case (supra). Under section 80HHC(T), deduction is available in respect of an assessee who is engaged in the business of export out of any goods or merchandise and clause (b) of sub-section (2) of section 80HHC stipulates that this section does not apply to the following goods or merchandise :
i. Mineral Oil. ii. Minerals and Ores (other than processed minerals and ores specified in the 12th Schedule. From the above statutory provisions, it becomes clear (hat deduction under section 80HHC is not available to an assessee who is engaged in the business of export of 'mineral oil’. The moot question is as to whether the petroleum products manufactured by the assessee, namely, Naptha, Diesel and Fuel oil fall under the expression 'mineral oil'. For the purposes of section 80HHC, the expression of 'mineral oil ' has not been defined. Therefore, this expression has to be interpreted and understood in the light of dictionary definitions and the observations made by the Bombay High Court in the two cases which have been referred to in the order of the ld. CIT(A) and also relied upon by both the sides before us........ The Bombay High Court, in case of Caltex (India) Ltd, (supra) was concerned with the meaning of 'mineral oil 'for the purpose of deciding as to whether lubricating oil is a mineral oil. AS already mentioned above, the Bombay High Court considered the fact that the lubricating oil was manufactured after blending mineral based oil with 18 chemicals V besides different dyes, vegetable oil and silicon. The following observations made by the High Court in this case, as reproduced from page 243 of the Report, are crucial : "The assessee's end product was, therefore, not mineral oil, as extracted or refined. It was not a mixture of hydrocarbons. It did not, therefore, fall within the meaning of the expression 'mineral oil' as used in the said item (3)." A fortiorari, the observations of the High Court can be interpreted to mean that refined petroleum product which is a mixture of hydrocarbons would come under the category of mineral oil. In our considered view, the Bombay High Court decision in the case of Caltex (India) Ltd. (supra) does not in any way help the assessee. In the case of the assessee the end product remained a mixture of hydrocarbons and the entire process is only the various stages of refining of the crude oil. It is true that in the case of Burmah Shell Refineries Ltd., the Bombay High Court had made it abundantly "clear that they were not deciding the issue finally and further in the case of Caltex (India) Ltd. (supra), it was observed that the view taken by the Bombay High Court in the case of Burmah Shell Refineries Ltd. (supra) was only a tentative view. Nevertheless, the observations made by the High Court in the case of Burmah Shell Refineries Ltd. are of considerable importance for the purpose of understanding and interpreting the meaning of the expression of 'mineral oil'. In this case, the dictionary definitions have also been quoted. The Webster's Third New International Dictionary defines mineral oil as a liquid product of mineral origin, i.e., within the viscosity limit recommended for oil (as petroleum, shale oil or any oil obtained from them by refining), especially the liquid petroleum. The Oxford English dictionary states that mineral oil is a general name for petroleum and various oils distilled from it. In Petroleum Dictionary by Lalia Phipps Boone, the meaning of the phrase 'mineral oil' is stated to be as under : i. Crude petroleum and its products. ii. Liquid petroleum. The Bombay High Court also referred to the meaning of mineral oil as given in the Illustrated Petroleum Dictionary and Products Manual - compiled and edited by the editorial staff of the Petroleum Educational Institute. This meaning reads as under : "Mineral oil - Petroleum as it comes from the ground is frequently called mineral oil because it comes from a mineral surrounding; also to distinguish it from oil secured from vegetable and animal sources. It may refer to (I) crude oil coming naturally from the ground or secured from coal, shale or any other natural source; (2) any one of the many products secured from the crude oil or secured from coal, shale or other natural sources." After considering these various authentic definitions and meaning of the phrase 'mineral oil', the Bombay High Court observed that it is clear that the expression 'mineral oil' is wide enough to include both petroleum in its crude form as well as the products secured or or obtained from the crude oil by refining. In our view, merely because these observations were made while deciding a writ petition and the matter was not finally decided by the Bombay High Court, the persuasive force of the observations made by the Bombay High Court are not in any way diluted.
22. We have also perused the chart of physicochemical properties of the petroleum products filed before us and from this chart, we find that there variation in the percentage of certain ingredients on qualities or colour, but the basic character has not changed. In our view, when mineral oil was excluded for the purposes of section 80HHC, the intention of the Legislature was quite clear. Considering the entire facts and circumstances, we feel that the refined petroleum products manufactured by the assessee, namely, Naphtha, Diesel and Fuel oil are covered under the expression 'mineral oil' for the purposes of section 80HHC. We, therefore, uphold the order of the Id. CIT(A) on this issue.”
The Hon’ble Gujarat High Court in case of Niko Resources Ltd. vs. Union of India (2015) 374 ITR 369 (Gujarat) has also dealt with the issue whether natural gas is covered by the term “mineral oil” for the purpose of section 80IB, wherein it is held that the expression “mineral oil” would include and encompass within itself both petroleum products and natural gas by returning following findings: “35.7 The Apex Court in unequivocal terms has held that, "natural gas in raw and liquefied form is a petroleum product and part of mineral oil resources." In light of the above judgment, and in absence of any specific definition of mineral oil under Section 80-IB of the Act, any reference to mineral oil in its natural, commercial and technical sense will include petroleum products and natural gas. The decision rendered by the Apex Court in Association of Natural Gas case would squarely apply. In the absence of the definition under Section 80-IB of the Act, if reliance has to be placed on allied enactments passed by Parliament, this would also lead to a clear conclusion that mineral oil includes natural gas. 35.8 It is therefore clear, that the expression "mineral oil" would include and encompass within itself, both, petroleum products and natural gas. When one deals with the provisions of the PSC or any taxing statute, without doubt mineral oil is the genus and contains within its ambit petroleum products and natural gas as its species. The term natural gas may not be sufficient to include petroleum product or mineral oil. On the contrary the expression "mineral oil" is wide enough to encompass within itself petroleum products and natural gas. The contention of the Respondent that petroleum products and natural gas have been made part of mineral oil only through inclusive provisions contained in Sections 42, 44BB and 293A and its conspicuous absence in section 80-IB has to be inferred that the purpose of Section 80-IB, mineral oil would not include petroleum products and natural gas. This contention of the learned counsel for the Respondent needs to be rejected for the following reasons:— (i) The judgment of the Apex Court makes it very clear that the expression "mineral oil" encompasses within itself petroleum products and natural gas. (ii) The Constitutional Bench judgment was delivered on 25.3.2004. The Explanation in Sections 42 and 293A was introduced vide Finance Act 1981 effective from 1.4.1981. Explanation of Section 44BB was again introduced vide Finance Act 1987 with retrospective effect from 1.4.1983. (iii) The judgment of the Apex Court which is later in time after
considering the technical, commercial and legislative meaning have concluded that mineral oil would encompass within itself petroleum products and natural gas. (iv) In the light of the judgment of the Constitutional Bench of the Apex Court, the Explanation in these Sections have to be read and referred to only as abundant caution.
35.9 If Explanation has to be given preference then it would amount to reading or rewriting the decision of the Apex court that mineral oil in its natural sense would not include natural gas. On the contrary, para 48 of the judgment uses the expression "all these factors lead to the inescapable conclusion" that natural gas in raw and liquefied form is petroleum product and part of mineral oil resources.
35.10 In fact, there is no dispute or contest on facts between the Union and the States as to what would constitute "natural gas" and its broad categories and chemical compositions. The Apex Court referred to technical literature and the advancement in science in the use of liquefied natural gas. The contention of the State that natural gas do not fall within the genre of petroleum products and mineral oil stood rejected by holding that natural gas in raw and liquefied form is petroleum product and part of mineral oil resources. 35.11 Section 80-IB of the Act has not defined mineral oil nor has it excluded petroleum products and natural gas. It is not alien to tax laws to have scripted definition to suit a particular enactment or introduce deeming provisions. The amendments to Section 80-IB do not define or restrict the meaning of mineral oil or even introduce such deeming provisions. The ratio and findings of Constitution Bench judgment apply squarely to the controversy in this case. The judgment conclusively covers the issue and we have no hesitation in concluding that the term "mineral oil" in the Section 80-IB of the Act, takes within its purview both petroleum products and natural gas.”
From the discussion made in preceding paras based upon factual, scientific and legal input, we are of the considered view that bitumen, bitumen emulsion, cut back bitumen, modified bitumen produced by the assessee certainly fall in the category of “mineral oil” for the purpose of section 80IB(a) of the Act for the following reasons:
I. that since for the purpose of section 80IB(9) definition of “mineral oil” has not been given in section 80IB(9) of the Act, its meaning has to be deduced from other sections of the Act, definition given in various statutes, journals, reports given by IITs and from the commonsense meaning by giving a wider interpretation to the “crude oil” as well as petroleum products.
II. that from the website of US Energy Information Administration; petroleum exports (Petx) website, website of Crown Oil a leading UK Distributors, CBDT circular No.57 (supra) definition given in section 44BB, 206C, 293A and definition given in the The Oil Industry (Development) Act, 1974, The Mines and Minerals (Development and Regulation) Act, 1957 and The Oil Fields (Regulation and Development) Act, 1948 etc. a uniform view has emerged that:- • “Mineral oil” includes petroleum and natural gas; • that “crude oil” is a mixture of hydrocarbons that exists as a liquid in underground geologic formation and remains a liquid when brought to the surface and then petroleum products are produced from the processing of a “crude oil” at refineries; • that petroleum is a generic name for hydrocarbons, including “crude oil” natural gas liquids, natural gas and their products and that all petroleum products are mineral oils;
III. that the term petroleum and “crude oil” are used inter changeably as the petroleum is a broad term that includes both “crude oil” and petroleum products. In other words “crude oil” refers to raw product drilled from ground and after refining and distillation process various petroleum products like gasoline, diesel bitumen etc. emerge which fall in the category of petroleum products.
IV. that the “mineral oil” covers both “crude oil” (crude petroleum) and the liquid products derived from crude petroleum which are in the nature of mixture of hydrocarbons and the4 bitumen, bitumen emission, cut back bitumen is one such liquid products.
V. that when as per definition given in the various statutes referred to in preceding para Nos.11, 25, 26 & 27 passed by the Parliament “mineral oil” includes natural gas and petroleum, the bitumen is one of the petroleum products certainly fall in the category of “mineral oils” being one of the main products derived from the “crude oil”.
VI. that Oxford English Dictionary also defines that “mineral oil” is a general name for petroleum and various oils distilled from it.
VII. that Hon’ble Bombay High Court in case of Burmah Shell Refineries Ltd. (supra) after considering various definitions and meaning of the phrase “mineral oil” observed that it is clear that the expression ‘mineral oil’, is wide enough to include both petroleum in its crude form as well as the products secured or obtained from the crude oil by refining. No doubt these observations were made by the Hon’ble High Court while deciding the writ petition in case of provisional assessment as this issue was ultimately required to be decided on merits, but it certainly has persuasive force to arrive at a logical conclusion.
VIII that from the discussions made in the preceding paras we can safely conclude that expression “mineral oil” is to be interpreted as a wider term so as to include not only the “crude oil” but also various other products derived from it by way of refining and distillations.
IX. that the view taken by the AO as well as the Ld. CIT(A) that bitumen is a “residual material” and assessee’s further processing of bitumen into bitumen emulsion, cut back bitumen, modified bitumen etc. by way of production or refining is not a “mineral oil” is not a sustainable view in the light of the scientific analysis and case law discussed in the preceding paras. So we are of the considered view that commercial production of any form of “mineral oil” from processing or refining of “crude oil” ought to be eligible for deduction under section 80IB(9) of the Act.
X. that when undisputedly “crude oil” is put to distillation and refining process various products viz. Liquid petroleum gas, gasoline, aviation fuel, kerosene for lighting, diesel
(Industrial gas oil), distillation heating oil, lubricating oil, fuel oil, bitumen are produced as has been duly explained in the pictorial diagram of fractionating column in the preceding paras and bitumen is one such byproduct of petroleum products, hence a ‘mineral oil’.
XI. that from the scientific literature and case law discussed in the preceding paras, we are of the considered view that bitumen, bitumen emulsion, cut back bitumen, modified bitumen etc. having been derived from “crude oil” by way of distillation and refining process are in the nature of mixture of hydrocarbons hence fall in the category of “mineral oil”. Hence, the question framed in preceding para 10 is answered in affirmative.
Assessee by specifically raising ground No.12 impugned the findings returned by the Ld. CIT(A) that the assessee has engaged less than 10 persons in the manufacturing process. The Ld. CIT(A) decided this issue by returning following findings: “Since the appellant has not made any specific written submissions nor it has filed any details on the issues to be re-examined, therefore, I am left with no option but to hold that in respect of these issues, the AO’s order requires no modification.”
The Ld. A.R. for the assessee drew our attention towards page 207 to 213 of paper book 2 wherein vide letter dated 22.01.2018 written to AO, bill of entry for Bahadurgarh Plant, muster roll for on roll employees and bills for contract workers hired for manufacturing process for Irungattukottai (Chennai) plant for July 2001, September 2001 and October 2001 are attached so as to prove the fact that assessee has the work force of more than 10 employees including contract workers as required under section 80IB of the Act. These documents have been given by the assessee during the remand reports duly acknowledged by the office of AO vide acknowledgement receipt dated 22.01.2018. But the Ld. CIT(A) has not examined these documents rather returned the evasive findings by recording wrong facts that “the assessee has not made any specific written submissions nor it has filed any details on the issues to be re-examined”.
At the same time, it is settled principle of law that contract employees hired by the assessee to carry out its manufacturing/production process are required to be considered for the purpose of section 80IB of the Act. So in these circumstances, we are of the considered view that this issue needs to be reexamined by the Ld. CIT(A) by perusing the evidence relied upon by the assessee after providing opportunity of being heard to the assessee.
In view of what has been discussed above, grounds No.1 to 11 and 14 raised by the assessee are determined in favour of the assessee and ground No.12 is determined in favour of the assessee for statistical purposes.
Ground No.13 of assessee’s appeals bearing to 1653/M/2022 for A.Y. 2002-03, 2005-06 to 2014-15, 2016-17 & 2018-19
Ground No.13 was not pressed and hence needs no adjudication. Accordingly, the same is dismissed as not pressed.
Grounds No.1 to 3 of Revenue’s appeals bearing & 1663/M/2022 for A.Y. 2012-13 & 2018-19
In both the aforesaid appeals Revenue has raised identical grounds that Ld. CIT(A) has erred in holding that the education cess amounting to Rs.1,50,76,323/- an admissible expenditure without appreciating the fact that education cess is part of tax under section 40A(2) of the Act and is not an allowable expenditure as per the decision rendered by Hon’ble Supreme Court in case of CIT Vs. K. Srinivasan (1972) 83 ITR 346 (SC); the second ground raised by the Revenue is that the Ld. CIT(A) has erred in holding that the assessee is entitled to a refund of dividend distribution tax paid under section 115-O(1) of the Act as dividend distribution tax is not a tax on dividend income of the recipient (being a foreign entity) of dividend income to which the provisions of Double Taxation Avoidance Agreement (DTAA) are not applicable but a tax on income, profits or gains of the dividend distributing Indian company as held in the case of SIDBI vs. CBDT[2021] 133 taxmann.com 158(Bom.).
The Ld. D.R. for the Revenue contended that they have raised a specific ground that the Ld. CIT(A)’s order is contrary to law as such deserves to be set aside to the Ld. CIT(A). This proposition has also not been disputed by the Ld. A.R. for the assessee.
The Ld. A.R. for the assessee has also contended that dividend recipient in these cases is a French shareholders M/s. Coals SA holding more than 10% of the shares of the assessee, thus reduced tax refund of 5% will apply on dividend paid by the appellant to M/s. Coal SA in accordance with Article 11 of India- France DTAA read with Article 10 of India-Slovenia DTAA. So any excess dividend distribution tax paid under section 115-O by the assessee over and above the 5% was claimed as refund by the assessee. However, submissions of the assessee have not been examined by the Ld. CIT(A) who has decided the issue on some different premise. Consequently, the issue raised by the Revenue in both the years is ordered to be remitted back to the Ld. CIT(A) to decide afresh after providing opportunity of being heard to the Revenue. Consequently, grounds No.1 to 3 of both the appeals of Revenue are decided in favour of the Revenue for statistical purposes.
Ground No.15 of assessee’s appeal bearing for A.Y. 2005-06
The assessee has raised this ground that Ld. CIT(A) has erred in denying the claim for refund of dividend distribution tax paid on dividends distributed to the foreign shareholders amounting to Rs.6,39,647/-.
At the very outset, both the authorized representatives of the parties to the appeal fairly conceded that this issue has not been decided by the Ld. CIT(A) in accordance with the decision rendered by the co-ordinate Bench of the Tribunal in case of Giesecke & Devrient (India) (P.) Ltd. (2020) 120 taxmann.com 338 (Delhi-Trib.) wherein similar claim for refund of dividend distribution tax was allowed in view of Article 10 of the DTAA between India and Germany. This proposition of law has also not been controverted by the Ld. D.R. for the Revenue. So we restore the issue back to the Ld. CIT(A) to decide afresh in accordance with the decision rendered by the Tribunal after providing opportunity of being heard to the assessee.
In the result, appeals filed by the assessee for A.Y. 2002-03, 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2016-17, 2017-18 & 2018-19 are partly allowed for statistical purposes and the appeals filed by the Revenue for A.Y. 2012-13 & 2018-19 are allowed for statistical purposes.
Order pronounced in the open court on 20.10.2022.