Commissioner Of Income Tax-Delhi vs Subhash Chand Rastogi
2014 Latest Caselaw 4285 Del

$~R76


*        IN THE HIGH COURT OF DELHI AT NEW DELHI
                                           Date of Decision: September 09, 2014
+                                   ITA 161/2002
         COMMISSIONER OF INCOME TAX-DELHI                         ..... Appellant
                           Through:      Mr.N.P.Sahni, Sr.Standing Counsel with
                                         Mr.Nitin Gulati, Advocate
                           versus
         SUBHASH CHAND RASTOGI                                    ..... Respondent

                           Through:      None
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO

SANJIV KHANNA, J (ORAL)

1. By order dated 18.03.2003, the following substantial question of law was

framed in this appeal filed by the Revenue which pertains to the Assessment

Year 1991-92:-

"Whether there was any material before the Tribunal to hold that the assessee was entitled to deduction under Section 80HHC of the Income Tax Act, 1961, in respect of alleged export of zinc oxide?.

2. The impugned order dated 20.11.2001 of the Income Tax Appellate

Tribunal („Tribunal‟ for short) was passed in ITA No. 5350/DEL/94.

3. We have heard the counsel for the appellant-Revenue, but, there is no

appearance on behalf of the respondent-assessee.

4. The respondent assessee an individual in his return of income filed on

31.10.1991 declared taxable income of Rs. 20,000/- after claiming deduction of

Rs. 45,51,898/- under Section 80HHC of the Income Tax Act, 1961 („Act‟ for

short) on account of export of Zinc Oxide. The Assessing Officer disallowed

the deduction under Section 80HHC on export of Zinc Oxide on two grounds;

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

80HHC of the Act and (ii) Zinc Oxide was a mineral and thus, Section 80HHC

of the Act would not be applicable.

5. The Commissioner of Income Tax (Appeals) („CIT(A)‟, in short)

reversed the said finding holding that Zinc Oxide was not a mineral but an

inorganic chemical and secondly that the export had been routed through Nepal

on the instructions of the importer at Hong Kong. He held that the export was

made to convertible foreign exchange area.

6. Aggrieved by the order of the CIT(A), Revenue preferred an appeal

before the Tribunal. On the question whether export was made to Nepal or

through Nepal, the findings of the Tribunal are recorded in paragraphs 3 and 4,

which, for the sake of convenience, are reproduced below:

"3. Ground No. 1 relates to the alleged error of the CIT(A) in directing the assessing officer to allow deduction under section 80HHC of the Act on the alleged export of zinc oxide. It has been argued by the learned DR that the finding of the learned CIT(A) that the above goods were routed through Nepal on instruction from Hongkong party over looking the fact

that basic evidence of custom authorities of Indian Government, Nepal Government and Hongkong has not been filed either before the assessing officer or before the CIT(A), evidencing export of goods. Even Nepal exports its goods via India. It has been observed by the assessing officer that some of the details filed by the assessee revealed that he has sent goods to Nepal are not eligible for deduction under Section 80HHC of the Act. At page 3 he has enumerated at Sl. No. 2 item zinc oxide, Bill No. 180 dated 18.2.1991, amount of Rs. 35,81,026/- date of realisation 21.9.1991 and amount realised Rs. 45,51,898/-. Against this order of the assessing officer, the assessee went in appeal before the CIT(A) who allowed the appeal of the assessee and directed the assessing officer to allow deduction under Section 80HHC of the ACT in respect of the items of export including zinc oxide at Sl. No. 2 in para 2 of the CIT(A)'s order. It has been argued by the learned DR that goods were exported via Nepal. The export goods first left from India to Nepal. Hence deduction under Section 80HHC is not available to the assessee and the CIT(A) has wrongly allowed the same. The assessing officer has also disallowed the claim of the assessee under Section 80HHC on the ground that zinc oxide is not a mineral. It has been vehemently argued by the learned AR of the assessee that the appeal of the revenue does not survive since in the case of Shri Narendra Rastogi, Appeal No. 175/94-95 has been decided by the same CIT(A) Shri K.K. Kapila vide order dated 16.6.1994 in which the claim of the assessee has been allowed under Section 80HHC for the same zinc oxide export via Nepal against which the revenue has not gone in appeal. Hence this appeal does not survive on the same facts, circumstances and law. The learned AR of the assessee has also argued that zinc oxide is chemical and not a mineral and all export have been made to hard currency area. It has been further argued by the learned AR that the assessee has complied with all the terms and conditions of dispatch of the goods. They have also got the confirmation from Hongkong regarding receipt of goods. They have also furnished incorporation/Registration Certificate of their buyer in support of the existence before the CIT(A). Details of

export sales have been given by the assessee on page 15 of the Paper Book in which Invoice No. 5/90-91 dated 28.1.1991 of zinc oxide has been shown to be exported to True Field Ltd., 903 Kowloon Centre, Hongkong for US$ 176400.00 and amounting to Rs. 35,81,026/-. The date of realization is 21.9.1991. At page 16 of the Paper Book details of export realisation for the assessment year 1991-92 have been given regarding the same zinc oxide. At page 18 of the Paper Book is the copy of Shipping Bill for the goods Indian produce in which the consignee's name has been described as M/s. True Field Ltd., Hongkong. Photostat copy of the Bank Realisation Certificate has also been filed at page 20 of the Paper Book. Copies of purchase order and confirmation regarding receipt of goods in Hongkong have been filed at pages 29-30 of the Paper Book. The learned DR has relied on the Circular No. 575 dated 31.8.1990 in which it is contained that, "With a view to removing any doubts in this regard, it is reiterated that the expression "convertible foreign exchange" in the above mentioned provisions of the Income Tax Act, also includes the amounts received in non-convertible rupees from bilateral account countries and receipts in Indian rupees under Government to Government credit. However, it does not include remittances from Nepal and Bhutan.

4. After having heard the rival submissions and considering the material available on record, we are of the view that the goods have been exported to Hongkong through Nepal and not to Nepal. Hence the circular is not applicable on the facts and circumstances of the case against the assessee. All the documents and certified copies have been filed by the assessee. Hence, we do not find any justification to interfere with the order of the learned CIT(A) which deserves to be confirmed and the same is confirmed. Thus both the grounds of appeal are disposed of accordingly".

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

fact made to a Hong Kong party whose name and details stand mentioned. The

export proceeds were specified in U.S. Dollars. The Bank Realisation

Certificate was filed and upon receipt converted into Indian Rupees.

8. The paper-book referred to in the order of the Tribunal has not been filed

by the Revenue before us and we, therefore, cannot comment on the contents of

the documents and what was stated and apparent from them. Revenue, being

the appellant before us, should have placed the said documents on record,

specially when the plea taken is that the decision of the Tribunal is factually

perverse. As noticed, no specific question of perversity stands framed while

admitting the appeal. It is also not clear whether the aforesaid documents were

not filed before the Assessing Officer, as is argued. The Assessing Officer had

denied entire claim under Section 80HHC of the Act including claim on exports

of Brass Artware and Readymade Garments and this factum has been adversely

commented upon by the CIT(A), who has recorded that the documents and

details have been filed before the Assessing Officer but were ignored and not

adverted to. Hence, on the first stand, we are not inclined to interfere with the

order passed by the Tribunal.

9. However, learned counsel for the appellant-Revenue is correct that the

Tribunal in the impugned order, has not considered their contention that Zinc

Oxide is a mineral and therefore in terms of Sub-Section (2) to Section 80HHC

of the Act, the export proceeds were not eligible. Our attention was drawn to

Sub-clause (ii) of Section (b) to Section 80HHC, which states that the Section

would not apply to minerals and ores other than processed minerals and ores

specified in the 12th Schedule. It is stated that processed Zinc Oxide was not

included in the 12th Schedule. Senior Standing Counsel has filed before us

articles and extracts from books and internet to submit that Zinc Oxide widely

considered to be a mineral in its purist form, yet to be thoroughly accurate, it is

an inorganic chemical compound with varying chemical properties depending

upon the application or use. Zinc Oxide, it is opined could never and cannot be

used directly in the extracted form as a raw mineral and must undergo some

synthetic chemical process to purify and alter its mineral structure. This

compound in particular in crystallized form is primarily used in mineral make

up and products of like nature. It is a sun blocker.

10. The order of the Tribunal, on the said issue and question is silent and

does not deal and answer whether the product exported was a mineral or an ore

and whether the product was a processed mineral or ore as specified in 12th

Schedule. The contention of the Revenue is that this product is not mentioned

in the list of processed mineral and ores specified in the 12th Schedule. What

was exported, whether it was mineral in the pure form or was it a processed

mineral or something else, is primarily a question of fact and this had to be

decided and determined by the Tribunal. They are the final fact finding

authority. We have already quoted paragraphs 3 and 4 of the order of the

Tribunal. These are the only finding/discussion. The Tribunal, therefore, has

not examined the aforesaid aspect though relevant and important to the issue in

question.

11. We record that the counsel for the Revenue has relied upon the decision

of the Supreme Court in Gem Granites Vs. Commissioner of Income-Tax,

[2004] 271 ITR 322 and Stonecraft Enterprises Vs. Commissioner of Income

Tax, [1999] 237 ITR 131 on the question of what would and should be

considered to be a mineral, mineral oil etc. Reference is also made to the

decision of the Karnataka High Court in Mithy Granite (P.) Ltd. Vs. Income

Tax Officer, [2004] 266 ITR 151 in which, again the question of what is

„mineral‟ has been examined and elucidated.

12. In these circumstances, we have no option but to answer the question of

law framed above in favour of the appellant-Revenue, but with an order of

remand to the Tribunal to decide the issue whether the exported goods were a

"mineral" and therefore, not eligible for deduction in view of Section 80HHC

(2)(b)(ii) of the Act. The issue and contention whether the product were

processed mineral and whether it would be eligible for deduction in terms of

12th Schedule is also an aspect which will have to be considered. In case, the

stand of the respondent-assessee is that it was not a mineral or processed

mineral, but a different product, again, the issue of fact will have to be

considered and answered. It is in these circumstances that we have passed an

order of remand. The appeal is accordingly disposed of. There will be no order

as to costs.

SANJIV KHANNA, J

V. KAMESWAR RAO, J SEPTEMBER 09, 2014/akb