1 & 2. [These paras are not reproduced here as they involve a minor issue.] 3. The assessee is a registered firm working under the name and style of Chamba Mineral Co. The business of the assessee is extraction of slates from the various quarries as mentioned by the ITO in his impugned order dated 20-2-1978. During the course of the assessment proceedings, the assessee had made a claim that it is entitled to deduction in respect of profits and gains derived from newly established industrial undertaking in backward areas. The ITO, however, held that 'the business of the assessee is extraction of slates from mines and, therefore, the assessee is engaged in mining'. The claim of the assessee was, therefore, rejected. This claim has been accepted by the learned Commissioner (Appeals) after giving detailed reasons in support of his decision. This order of the learned Commissioner (Appeals) is under challenge before us at the instance of the revenue.
4. We have heard the parties and for the reasons recorded infra we do not find any justification for an interference in the order of the learned Commissioner (Appeals). Section 80HH of the Income-tax Act, 1961 ('the Act'), came on the statute book with effect from 1-4-1974 by insertion of Section 9 in the Direct Taxes (Amendment) Act, 1974. It provides deduction in respect of profits and gains from newly established industrial undertaking or hotel business in backward areas.
Sub-section (10) of this section, however, contains a prohibition for such allowance and this prohibition is in relation to any undertaking engaged in mining. The real issue, therefore, is whether the assessee is engaged in mining or not. If the assessee is engaged in mining, the deduction will not be admissible. If the assessee is not engaged in mining but only extracting slates, the deduction would be admissible.
5. The very order of the ITO shows that the assessee is not engaged in mining. The ITO has himself stated that the business of the assessee is extraction of slates from the various quarries taken up by it'.
However, he himself later on held in his order that it is a mining business. Therefore, the learned Commissioner (Appeals) went into the question as to what mining and extraction is. On the basis of Webster's Seventh New College Dictionary, he brought out the distinction between a mine and a quarry. This distinction is that a mine is a pit or excavation in the earth from which mineral substances are taken whereas a quarry is open excavation usually for obtaining building stone, slate or limestone, etc. The word 'mining' means the process of business of working mines whereas the word 'quarrying' is an act of extracting stone, marble, slate or limestone, etc. There is further distinction brought out by the learned Commissioner (Appeals) between the words 'mining and quarrying' with reference to Encyclopaedia Britannica, Vol.
15 which is as under : Mining: The mining of metals and their ores from the ground. The broad classification of mining methods are open-cut mining and underground mining, (p. 542) Quarrying : The art of mining or obtaining from the earth's crust the various kinds of stones used in construction, road building and the various manufacturing process, for which rock minerals are employed, the operation being in most cases, conducted in open workings. (p. 827) 6. It is thus clear that extraction of slates by the assessee from the earth could not be termed as mining. The conclusion drawn by the ITO that because the assessee was extracting slates from the earth, the assessee was engaged in mining was, therefore, erroneous. In our considered view on the reasons given above, the learned Commissioner (Appeals) was fully justified in coming to the conclusion that the assessee was not engaged in mining and, therefore, there was no prohibition of allowing deduction to the assessee under Section 80HH in respect of profits and gains from newly established industrial undertaking. It is not in dispute that the industrial undertaking is new and it is in the backward area.
7. The result would be that the appeal of the revenue with regard to the deduction under Section 80HH allowed by the Commissioner (Appeals) is to be dismissed.