Export – Profits derived from export of granite not eligible for deduction under section 80HHC

Mining of granite from quarries and exporting them after cutting, polishing, etc. tantamounts to manufacture.

The following question of law arose from determination before the Supreme Court in Civil Appeal No.2997 of 2004.

“Whether the assessee is entitled to claim deduction to the extent of profits referred to in s/s. (IB) of section 80HHC of the Income-tax Act, 1961, derived from export of goods – in this case, granite, for the assessment year 1988-89?”

The Supreme Court answered above question against the assessee in view of its judgment in the case Gem Granites vs. CIT reported in [2004] 271 ITR 322 (SC). In Civil Appeal Nos. 7472-7473 of 2004 the following question of law arose for determination before the Supreme Court.

“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessee is entitled to investment allowance on the activities of the assessee, viz., mining granite from quarries and exporting them after cutting, polishing etc., which tantamount to manufacture for the purpose of section 32A of the Income-tax Act, 1961?

The Supreme Court held that this issue was squarely covered in favour of the assessee, vide its judgment in the case of CIT v. Sesa Goa Ltd. [2004] 271 ITR 331 (SC).