Export profit: Deduction u/s.80HHC of Income-tax Act: A.Ys. 1995-96, 1997-98, 1998-99 and 2000-01: Exclusion of mineral oil: Calcined petroleum coke derived from crude petroleum is not mineral oil: Assessee is entitled to deduction.

The assessee was engaged in manufacture and export of calcined petroleum coke. For the relevant years the assessee’s claim for deduction u/s.80HHC of the Income-tax Act was allowed by the Assessing Officer. However, the Commissioner withdrew the allowance by exercising the powers u/s.263 of the Act. The Tribunal upheld the decision of the Commissioner holding that the calcined petroleum coke was a form of mineral oil and in view of Ss.2(b) of section 80HHC, the provision for deduction u/s.80HHC(1) was not applicable to the calcined petroleum coke manufactured by the assessee.

On appeal filed by the assessee, the Bombay High Court reversed the decision of the Tribunal and held as under:

“(i) The expression ‘mineral oil’ is not defined in the Act. The expression ‘minerals’ is used primarily for substances found on the earth or below the land and does not denote a product manufactured from the minerals found on the land or below the land. The word ‘oil’ ordinarily means a substance which is in liquid form and does not include a rock or solid substance or crystallised substance. For a substance to be regarded as mineral oil, it must ordinarily be a substance in liquid form and derived or extracted from the earth or land, from the surface of the earth or from below the earth.

(ii) Although calcined petroleum coke is a product which is derived from crude oil, no trader in the market would call the calcined petroleum coke a crude oil or a mineral oil. In common parlance, nobody would mistake calcined petroleum coke for a crude oil. Though the initial raw material used for manufacture of the calcined petroleum coke is petroleum crude oil extracted from the earth, the product which is manufactured is an entirely different product commercially known and regarded as different from petroleum crude and which is different from that derived by mere distillation of the petroleum crude which is a mineral oil. Calcined petroleum coke cannot be regarded as a mineral only because the original raw material is mineral oil.

(iii) The calcined petroleum coke was not a mineral oil within the meaning of section 80HHC.”