STONECRAFT ENTERPRISESversusCOMMISSIONER OF INCOME TAX

                            STONECRAFT ENTERPRISES                                         A   .
                                      v.
                          COMMISSIONER OF INCOME TAX

                                    MARCH 18, 1999

 "                    [S.P. BHARUCHA AND R.C. LAHOTI, JJ.]                                 B

             Income Tax Act, 1961 :


----         Section 80HHC (2)(b)-Export of 'granite '-Deduction on the profits
       earned from export of goods-Exclusion of goods which were "mineral oil",
        ''minerals'' and ''ores' '-Central Board ofDirect Taxes issuing circular stating
                                                                                           c
       that value added granite eligible for deduction-No proof of granite exported
-.     by assessee suhjected to any process-Claim for deduction-Entitlement of-
       Held, ''Granite'' is a ''mineral under the provision ofSection BOHHC (2)(b)-
       Thus, assessee not entitled.to claim benefit of deduction thereunder.
                                                                                           D
             interpretation of statutes :

             Doctrine-Nmscitur sociis-Applicability of

             Words and Phrases:
                                                                                           E
             ''Mineral (it'', ''Minerals'', ''Ores' '-Meaning and scope of in the
       context of Section 80HHC (2)(b) of the Income Tax Act, 1961.

             Appellant-assessee, was engaged in exporting 'granite'. Under Section
       80HHC of the Income Tax Act, 1961, an assessee engaged in the business
       of export of any goods or merchandise was entitled to deduction on the profits      F
       gained. However, under Sub-section (2)(d) of the said Section, deduction was
       not available to mineral oil and minerals and ores. Assessee's claim for
       deduction was rejected by the Tribunal holdin~ that 'granite' was 'mineral'
       within the meaning of the term under Section 80HHC (2){b) of the Act.
       Aggrieved, appellant has filed the present appeal.                                  G
 ~
             The appellant-assessee contended that while granite was a mineral in
       general sense, it was not a mineral for purposes of Section 80HHC of the
       Act and therefore, the deductions provided therein were available to it; the
       Circular issued by the Central Board of Direct Taxes, states that while
       granite alone can be considered as a mineral, any process applied to granite        H
                                              17
    18                     SUPREME COURT REPORTS                     [1999] 2 S.C.R.

A would deprive the quality of rough minerals from the dimensional blocks of
    granite, which was a value added marketable commodity; therefore, profits
    derived from export of granite dimensional blocks would be eligible for
    deduction under Section 80HHC of the Act; in view of the doctrine of noscitur
    a sociis, the word 'minerals' in Section 80HHC should have been read in the
    context of the word 'ores' with which it was associated and must draw colour
B   therefrom; that is to say, it must read as referring only to such minerals
    as are extracted from ores and not others, thus excluding granite.

            Dismissing the appeals, this Court

C         HELD : 1.1. 'Granite' is a mineral covered under the provisions of sub-
    section 2(b) of Section 80HHC of Income Tax Act, 1961 and appellant-
    assessee is not entitled to claim benefit of deduction provided thereunder.
                                                                          [20-D]

           1.2. The doctrine of noscitur a sociis is applicable. The word "minerals"
D   in· Sub-section 2(b) of S. 80HHC must be read in the context of "mineral oil"
    and. "ares" with which it is associated. These words taken together are
    intended to encompass all that may be extracted from the earth. All minerals
    extracted from the earth, granite included, must, therefore, be held to be
    covered by the provisions of Sub-section (b) of Section 80HHC, and the
E   exporter is, therefore, disentitled to the benefit of that Section. [21-C-D]

          The State of Mysore v. Swamy Satyanand Saraswati (dead) by his lrs.
    AIR, [1971) SC 1569; Banarsi Dass Chadha & Bros. v. Lt. Governor Delhi
    Administration & Ors., [1979] 1 SCR 271 and Pardeep Aggarbatti, Ludhiana
    v. State of Punjab & Ors., [1997] 8 SCC 511, referred to.
F
            Halsbury Laws of England, referred to.

         2. There is nothing on record to indicate that what the assessee
    exports is value added granite.The assessee thus, cannot derive any assistance
    from the circular issued by the Central Board of Direct Taxes.         [20-CJ
G
            CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 144-146 of
    1994.

          From the Judgment and Order dated 28.7.93 of the Kamataka High Court
H   in LT.R.C. Nos. 134-l36ofl992.
               STONECRAFT ENTERPRISES v.C.l.T. lBHARUCHA, J.]                      19

-          A.K. Ganguli and M.T. George for the Appellant.

            V. Gaurishanker and S. Rajappa for the Respondent
                                                                                         A


            The Judgment of the Court was delivered by

            BHARUCHA, J. We are concerned in these appeals with the Assessment           B
      Years 1985-86, 1987-88 and 1988-89. Two questions are before us but it is
      apparent that the question really to be answered is the first one. The questions
      read thus :

---            "l. Whether, on the facts and in the circumstances of the case, the
              Tribunal was not correct in holding that 'granite' is a 'mineral' within   C
              the meaning of the_ term found in Section 80 HHC(b)(ii), Income Tax
              Act?

               2. Whether on the facts and in the circumstances of the case, the
              Tribunal was right in holding that the assessee is not entitled to the
              allowance claimed under Section 80 HHC in respect of the granite           D
            . exported from India?"

            The questions having been answered against it, the assessee is m
      appeal.

            There is no material in the finding of the Tribunal other than the E
      indication that the assessee exports granite. The assessee claimed for the
      granite which it exported the deduction available under Section 80 HHC of the .
      Income Tax Act, 1961 as inserted by the Finance Act, 1983 with effect from
      lst April, 1983. The relevant provision permits, where "an assessee, being an
      Indian company or a person (other than a company) resident in India, is
      engaged in the business of export out of India of any goods or merchandise F
      to which this section applies", the deduction in the computation of its total
      income of an amount not exceeding 50% of "the profits derived by the
      assessee from the export of such goods or merchandise". Sub-section (2)(b)
      states : "This section does not apply to the following goods or merchandise,
      namely: (i) mineral oil; and (ii) minerals and ores''.
                                                                                         G
             It is the contention of learned counsel for the assessee that while
      granite is a mineral in the general sense, it is not a mineral for purposes of
      Section 80 HHC and that, therefore, the deduction provided for therein is
      available to the assessee. Our attention has been drawn to the provision as
      it read before the appropriate year and thereafter. Our attention has also been    H
    20                      SUPREME COURT REPORTS                     [1999] 2)1£.R.

A   drawn to a circular issued in the context of the later provision. This circular,
    issued by the/Central Board of Direct Taxes, is dated 1st November, 1995 and
    records the Board's opinion that while granite alone can be considered as a
    mineral, any process applied to granite would deprive the quality of rough
    minerals from the dimensional blocks of granite, which was a value added
    marketable commodity; therefore, profits derived from export of granite
B   dimensional blocks would be eligible for deduction under Section 80 HHC of
    the Act. As we have already noted, there is nothing on record to indicate that
    what the assessee exports is such value added granite so that, even assuming
    that the said circular is explanatory and can, therefore, relate back to the year


c
    in question, the assessee cannot derive any assistance therefrom.

          It is necessary immediately to note that the Mines and Minerals
                                                                                        -
    (Regulation and Development) Act covers granite as a minor mineral. This
    Court in The State of Mysore v. Swamy Satyanand Saraswati (dead) by hiS
    Lrs., AIR (1971) SC 1569, has held that granite is a mineral. The.Court
    quoted Halsbury Laws of England, thus :
D
            "'The test of what is a mineral is what, at the date of instrumentin'
            question, the word meant in the vernacular of the mining world, the
            commercial world, and among land owners, and in case of conflict
            this meaning must prevail over the purely sciedti{ic meaning."

          No material was laid by the assessee before the Tribunal to suggest that
E
    in the export world granite was treated as anything but a mineral.

           Reference was made to the judgment of. this Court in Banarsi Dass
    Chadha & Bros. v. Lt. Governor, Delhi Administration & Ors., [l 979] I SCR
    271. It was there held that the word 'mineral' is a word of comtnon parlance,
F   capable of amultiplicity of meanings depending upon the context For example,
    the word is occasionally used in a very wide sense to denote any substance
    that is neither animal or vegetable. Sometimes it is _used in a narrow sense to
    mean no more than precious metals like gold and silver. Again, the word
    'minerals' is often used to indicate substances obtained from underneath the
    surface of the earth by digging or quarrying.
G
          It is at this stage appropriate to refer to the argument of learned counsel
    for the assessee based upon the doctrine of itoscitur a sociis, which, as he
    submitted, has been explained by this Court in Pardeep Aggarbatti, Ludhiana
    V. State of Punjab & Ors., [1997] 8 sec 511 thus :


H         "Entries in the Schedules of sales tax and excise statutes list some
              STONECRAFT ENTERPRISES v'.C.l.T. [BHARUCHA, J.)                   21


-   articles separately and some articles are gr<?uped together. When they are
    grouped together, each word in the el'l.try draws colour from the other words
    therein . .This is the principle of noscitur a sociis."
                                                                                      A


          It was submitted, based upon this doctrine, that the word 'minerals' in
    Section 80 HHC should be read in the context of the word 'ores' with which
    it was associated and must draw colour therefrom; that is to say, it must read    B
    as referring only to such minerals as are extracted from ores and not others,
    thus excluding granite.

          We agree that the said doctrine is applicable. The word 'minerals' in
    sub- section (2)(b) of Section 80 HHC must be read in the context of 'mineral     C
    oil' and 'ores' with which it is associated. It seems to us that these three
    words taken together are intended to encompass all that may be extracted
    from the earth. All minerals extra!ried from the earth, granite included, must,
    therefore, be held to be covered by the provisions of. sub-section (b) of
    Section 80 HHC, and the exportt;t thereof is, therefore, discntitled to the
    benefit of that section.                                                          D
          There is no merit in the appeals and they are dismissed with costs.

    S.V.KJ.                                                   Appeals dismissed.