Bitumen and its by products are ‘Mineral Oil’ u/s 80IB(a) of Income Tax Act: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that Bitumen and it's by-products are “mineral oil” under Section 80IB(a) of Income Tax Act, 1961.

The assessee company, M/s. Hindustan Coals Private Limited is a joint venture of Hindustan Petroleum Corporation (HPCL), India, and Colas SA, France. HPCL during its refining process of crude oil produces various items like Liquid Petroleum Gas (LPG), petrol, Naphtha, kerosene, diesel, lubricating oil, and fuel oil, and also produces bitumen. The assessee after purchasing bitumen from HPCL produces products viz. bitumen emulsion, cut back bitumen, modified bitumen, etc.

The assessee company by filing a return of income claimed deduction under section 80IB of the Income Tax Act, 1961 qua its plant in Haryana and Tamil Nadu. By declining the contentions raised by the assessee, the Assessing Officer (AO) proceeded to disallow the deductions claimed by the assessee under section 80IB of the Income Tax Act, 1961.

Bitumen, bitumen emulsion are liquid products derived from crude petroleum and are in the nature of mixture of hydrocarbons and further observed that bitumen and bitumen emulsion having their origin from crude petroleum are in the nature of mixture of hydrocarbons.

The Counsel for the assessee tried to explain that bitumen is a mineral by relying upon scheme of the “crude oil” distillation process of M/s. Crown Oil, a leading UK Petroleum distributor and also relied upon classification of bitumen/asphalt used in the US patent classification definition and further relied upon decision rendered by the High Court of Bombay in case of Burmah Shell Refineries Ltd case.

The Counsel appearing for the Department contended that “bitumen is already a by-product of “crude oil”, hence further processing of this by-product of “crude oil” does not qualify to be a “mineral oil” for the purpose of deduction under section 80IB of the Income Tax Act.

A Coram consisting of Kuldip Singh, Judicial Member and Amarjit Singh, Accountant Member observed that “Based upon factual, scientific and legal input, we are of the considered view that bitumen, bitumen emulsion, cut back bitumen, modified bitumen produced by the assessee certainly fall in the category of “mineral oil” for the purpose of section 80IB(a) of the Income Tax Act, 1961.”

To Read the full text of the Order CLICK HERE

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