557. Whether profits derived from export of cut and polished dimensional blocks, granite or other rocks is eligible for deduction under section 80HHC
Circular No. 729 was issued by the Central Board of Direct Taxes on 1 November 1995. Its subject is 557. Whether profits derived from export of cut and polished dimensional blocks, granite or other rocks is eligible for deduction under section 80HHC.
Reverses the Board's earlier stand and holds that profits from the export of granite dimensional blocks qualify for deduction under section 80HHC. Circular No. 693 dated 17th November 1994 had treated dimensional blocks as ineligible; on reconsideration the Board accepts that when rough granite is cut into blocks of uniform colour and size it undergoes not only mechanical cutting but dressing and polishing to remove natural flaws such as colour and grain variations, joints, fissures, moles, patches and hairline cracks. That process takes the blocks out of the character of a rough mineral and makes them a value added marketable commodity, which falls within cut and polished minerals and rocks including cut and polished granites, item (x) of the Twelfth Schedule inserted with effect from 1st April 1991.
The Granite Association and CAPEXIL represented that dimensional blocks are cut to uniform colour and dimension, are sold on a volume and dimensional basis, and involve substantial value addition to rough granite.
| Under the 1961 Act | Now |
|---|---|
| s.80HHC | no counterpart recorded |
557. Whether profits derived from export of cut and polished dimensional blocks, granite or other rocks is eligible for deduction under section 80HHC
1. The deduction under section 80HHC is available, as at present, in respect of "cut and polished minerals and rocks including cut and polished granites" with effect from 1-4-1991 by virtue of insertion of item ( x) in the Twelfth Schedule to the Income-tax Act, 1961. The export of dimensional blocks of granite is presently ineligible for the benefit of section 80HHC in view of CBDT Circular No. 693, dated 17-11-1994. (Sl. No. 556)
2. On the representation made by Granite Association and CAPEXIL, the issue has been reconsidered. The representation basically brings to light that rough granite is cut to dimensional blocks in uniform colour and dimension and export proceeds are realised on volume and dimensional basis. Thus, the dimensional blocks of granite are exported only after going through a mechanical process, involving substantial value addition to rough granite.
3. The Board is, therefore, of the view that while granite can alone be considered as mineral, any process applied to granite would deprive the quality of rough mineral from the dimensional blocks of granite, which is a value added marketable commodity. When rough granite is cut to dimensional blocks of uniform colour and size, it not only undergoes mechanical process of cutting, but also certain amount of dressing and polishing is involved to remove various natural flaws such as colour variations, grain variations, joints, fissures, moles, patches, hair line cracks, etc. The profits derived from the export of such granite dimensional blocks would, accordingly, be eligible for deduction under section 80HHC of the Act.
Circular : No. 729, dated 1-11-1995.
In an assessment or appeal on a section 80HHC claim by a granite exporter, and in rectification or reassessment proceedings where the earlier circular had been applied to deny the deduction.
Source: the Income Tax Department’s own published text — its page for this instrument.