Circular No. 693

What it does

Holds that granite and other rocks must be both cut and polished before export to earn the section 80HHC deduction. Section 80HHC allows a deduction of profits from export of goods other than minerals, and the Finance (No. 2) Act, 1991 extended it to processed minerals and ores listed in the Twelfth Schedule, item (x) of which reads 'cut and polished minerals and rocks including cut and polished granite'. The Board reads the entry as clear and unambiguous: it is not enough that the rock is cut into blocks and washed and cleaned before export; it must also be polished. That is in line with the Government's policy of encouraging export of polished granite and other rocks, where value addition before export is high, and discouraging export of raw blocks, where it is low.

Why it was issued

Organisations and individual taxpayers raised doubts whether the deduction was available on granite or other rocks cut and exported as raw blocks after washing and cleaning.

Who it reaches

Exporters of granite and dimensional stone blocks
Quarry operators exporting rough cut blocks
Assessing Officers testing a section 80HHC claim on stone exports

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.80HHC	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

556. Whether profits derived from export of cut and polished dimensional blocks, granite or other rocks is eligible for deduction under section 80HHC
Section 80HHC of the Income-tax Act allows a deduction from the gross total income of the entire profits derived from export of goods other than minerals. Finance (No. 2) Act, 1991 extended the benefit to export of processed minerals and ores mentioned in the Twelfth Schedule to the Income-tax Act. Item (x) of the Schedule mention "cut and polished minerals and rocks including cut and polished granite".
Some organisations and individual taxpayers have raised doubts whether the deduction under section 80HHC is available in respect of export of granite or other rocks that are cut and exported as raw blocks after being washed and cleaned.
The entry in the Twelfth Schedule is very clear and unambiguous and uses the term "cut and polished". Therefore, for availing of the benefit under section 80HHC, it is necessary that the rock is not only cut into blocks but also polished before it is exported. This is in line with Government’s policy to encourage export of polished granite and other rocks where value addition before export is high and to discourage export of raw blocks where value addition is low (See also Sl. No. 557)
Circular : No. 693, dated 17-11-1994.

What to watch

Washing and cleaning is not polishing; the claim fails unless the rock is polished before export.
The deduction for minerals runs through the Twelfth Schedule, so the exact entry has to be matched, not the general character of the goods.
Section 80HHC has since been phased out, so this speaks to claims for the years it was available.

Where you meet it

In an assessment or appeal on a granite exporter's section 80HHC claim, where the dispute is over the state of the stone at the time of export.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 1 — 558. Guidelines regarding filing of auditor’s report in old format of Form No. 10CCAC, along with the return, in place o 17 January 2001
Circular No. 729 — 557. Whether profits derived from export of cut and polished dimensional blocks, granite or other rocks is eligible for 1 November 1995
Circular No. 680 — Sections 115J & 115JA 21 February 1994
Circular No. 624 — 555. Clarification regarding reopening of assessments on account of retrospective amendment made in section 80HHC in res 23 January 1992
Circular No. 600 — 554. Profits retained for export business in the case of tax-payers engaged in the business of growing and manufacturing 23 May 1991
Circular No. 575 — 545. Whether ‘convertible foreign exchange’ does not include remittances from Nepal and Bhutan 31 August 1990

← Circular No. 694 · Circular No. 692 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is