IN 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, following substantial question of law was framed in this appeal filed by Revenue which pertains to Assessment Year 1991-92:- Whether there was any material before Tribunal to hold that assessee was entitled to deduction under Section 80HHC of Income Tax Act, 1961, in respect of alleged export of zinc oxide?. 2. impugned order dated 20.11.2001 of Income Tax Appellate Tribunal (Tribunal for short) was passed in ITA No. 5350/DEL/94. 3. We have heard counsel for appellant-Revenue, but, there is no appearance on behalf of respondent-assessee. ITA No. 161/2002 Page 1 of 8 4. respondent assessee 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 Income Tax Act, 1961 ( Act for short) on account of export of Zinc Oxide. Assessing Officer disallowed deduction under Section 80HHC on export of Zinc Oxide on two grounds; (i) export had been to Nepal and therefore, was not eligible under Section 80HHC of Act and (ii) Zinc Oxide was mineral and thus, Section 80HHC of Act would not be applicable. 5. Commissioner of Income Tax (Appeals) ( CIT(A) , in short) reversed said finding holding that Zinc Oxide was not mineral but inorganic chemical and secondly that export had been routed through Nepal on instructions of importer at Hong Kong. He held that export was made to convertible foreign exchange area. 6. Aggrieved by order of CIT(A), Revenue preferred appeal before Tribunal. On question whether export was made to Nepal or through Nepal, findings of Tribunal are recorded in paragraphs 3 and 4, which, for sake of convenience, are reproduced below: 3. Ground No. 1 relates to alleged error of CIT(A) in directing assessing officer to allow deduction under section 80HHC of Act on alleged export of zinc oxide. It has been argued by learned DR that finding of learned CIT(A) that above goods were routed through Nepal on instruction from Hongkong party over looking fact ITA No. 161/2002 Page 2 of 8 that basic evidence of custom authorities of Indian Government, Nepal Government and Hongkong has not been filed either before assessing officer or before CIT(A), evidencing export of goods. Even Nepal exports its goods via India. It has been observed by assessing officer that some of details filed by assessee revealed that he has sent goods to Nepal are not eligible for deduction under Section 80HHC of 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 assessing officer, assessee went in appeal before CIT(A) who allowed appeal of assessee and directed assessing officer to allow deduction under Section 80HHC of ACT in respect of items of export including zinc oxide at Sl. No. 2 in para 2 of CIT(A) s order. It has been argued by learned DR that goods were exported via Nepal. export goods first left from India to Nepal. Hence deduction under Section 80HHC is not available to assessee and CIT(A) has wrongly allowed same. assessing officer has also disallowed claim of assessee under Section 80HHC on ground that zinc oxide is not mineral. It has been vehemently argued by learned AR of assessee that appeal of revenue does not survive since in case of Shri Narendra Rastogi, Appeal No. 175/94-95 has been decided by same CIT(A) Shri K.K. Kapila vide order dated 16.6.1994 in which claim of assessee has been allowed under Section 80HHC for same zinc oxide export via Nepal against which revenue has not gone in appeal. Hence this appeal does not survive on same facts, circumstances and law. learned AR of assessee has also argued that zinc oxide is chemical and not mineral and all export have been made to hard currency area. It has been further argued by learned AR that assessee has complied with all terms and conditions of dispatch of goods. They have also got confirmation from Hongkong regarding receipt of goods. They have also furnished incorporation/Registration Certificate of their buyer in support of existence before CIT(A). Details of ITA No. 161/2002 Page 3 of 8 export sales have been given by assessee on page 15 of 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/-. date of realization is 21.9.1991. At page 16 of Paper Book details of export realisation for assessment year 1991-92 have been given regarding same zinc oxide. At page 18 of Paper Book is copy of Shipping Bill for goods Indian produce in which consignee s name has been described as M/s. True Field Ltd., Hongkong. Photostat copy of Bank Realisation Certificate has also been filed at page 20 of Paper Book. Copies of purchase order and confirmation regarding receipt of goods in Hongkong have been filed at pages 29-30 of Paper Book. learned DR has relied on Circular No. 575 dated 31.8.1990 in which it is contained that, With view to removing any doubts in this regard, it is reiterated that expression convertible foreign exchange in above mentioned provisions of Income Tax Act, also includes 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 rival submissions and considering material available on record, we are of view that goods have been exported to Hongkong through Nepal and not to Nepal. Hence circular is not applicable on facts and circumstances of case against assessee. All documents and certified copies have been filed by assessee. Hence, we do not find any justification to interfere with order of learned CIT(A) which deserves to be confirmed and same is confirmed. Thus both grounds of appeal are disposed of accordingly . 7. reading of aforesaid finding would indicate that export was in fact made to Hong Kong party whose name and details stand mentioned. ITA No. 161/2002 Page 4 of 8 export proceeds were specified in U.S. Dollars. Bank Realisation Certificate was filed and upon receipt converted into Indian Rupees. 8. paper-book referred to in order of Tribunal has not been filed by Revenue before us and we, therefore, cannot comment on contents of documents and what was stated and apparent from them. Revenue, being appellant before us, should have placed said documents on record, specially when plea taken is that decision of Tribunal is factually perverse. As noticed, no specific question of perversity stands framed while admitting appeal. It is also not clear whether aforesaid documents were not filed before Assessing Officer, as is argued. Assessing Officer had denied entire claim under Section 80HHC of Act including claim on exports of Brass Artware and Readymade Garments and this factum has been adversely commented upon by CIT(A), who has recorded that documents and details have been filed before Assessing Officer but were ignored and not adverted to. Hence, on first stand, we are not inclined to interfere with order passed by Tribunal. 9. However, learned counsel for appellant-Revenue is correct that Tribunal in impugned order, has not considered their contention that Zinc Oxide is mineral and therefore in terms of Sub-Section (2) to Section 80HHC of Act, export proceeds were not eligible. Our attention was drawn to Sub-clause (ii) of Section (b) to Section 80HHC, which states that Section ITA No. 161/2002 Page 5 of 8 would not apply to minerals and ores other than processed minerals and ores specified in 12th Schedule. It is stated that processed Zinc Oxide was not included in 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 mineral in its purist form, yet to be thoroughly accurate, it is inorganic chemical compound with varying chemical properties depending upon application or use. Zinc Oxide, it is opined could never and cannot be used directly in extracted form as 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 sun blocker. 10. order of Tribunal, on said issue and question is silent and does not deal and answer whether product exported was mineral or ore and whether product was processed mineral or ore as specified in 12th Schedule. contention of Revenue is that this product is not mentioned in list of processed mineral and ores specified in 12th Schedule. What was exported, whether it was mineral in pure form or was it processed mineral or something else, is primarily question of fact and this had to be decided and determined by Tribunal. They are final fact finding authority. We have already quoted paragraphs 3 and 4 of order of Tribunal. These are only finding/discussion. Tribunal, therefore, has ITA No. 161/2002 Page 6 of 8 not examined aforesaid aspect though relevant and important to issue in question. 11. We record that counsel for Revenue has relied upon decision of 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 question of what would and should be considered to be mineral, mineral oil etc. Reference is also made to decision of Karnataka High Court in Mithy Granite (P.) Ltd. Vs. Income Tax Officer, [2004] 266 ITR 151 in which, again question of what is mineral has been examined and elucidated. 12. In these circumstances, we have no option but to answer question of law framed above in favour of appellant-Revenue, but with order of remand to Tribunal to decide issue whether exported goods were mineral and therefore, not eligible for deduction in view of Section 80HHC (2)(b)(ii) of Act. issue and contention whether product were processed mineral and whether it would be eligible for deduction in terms of 12th Schedule is also aspect which will have to be considered. In case, stand of respondent-assessee is that it was not mineral or processed mineral, but different product, again, issue of fact will have to be considered and answered. It is in these circumstances that we have passed ITA No. 161/2002 Page 7 of 8 order of remand. appeal is accordingly disposed of. There will be no order as to costs. SANJIV KHANNA, J V. KAMESWAR RAO, J SEPTEMBER 09, 2014/akb ITA No. 161/2002 Page 8 of 8 Commissioner of Income-tax, Delhi v. Subhash Chand Rastogi