Deductions u/s80HHC in case of cut and polished diamonds and gem stones. - Income Tax - 1562/CBDT

INSTRUCTION NO. 1562/CBDT Dated: May 24, 1984 Section 80-HHC of the I.T.Act, 1961 has been inserted in the I.T.Act, 1961 by the Finance Act 1983 and the deduction under this provision is admissible in relation to assessment year 1983-84 and subsequent years. The tax concession is, however, not admissible in relation to export of, inter alia minerals and ores. 2. The Board has received a large number of a references on whether the export of cut and polished diamonds and gem stones will qualify for deduction under section 80-HHC. The Board are advised of the following features in the export of cut and polished and gem stones:- (i) No export of raw diamonds is permitted under the Import and Export regulations. (ii) Export from India takes place of cut and polished diamonds. (iii) Raw diamonds imported from abroad after being cut and polished are exported in the processed form this will be supported by documents scrutinised and certified by the Customs department. (iv) Import of rough diamonds is allowed as replenishment against the actual exports of cut and polished diamonds, after the actual exports take place, not necessarily in the previous year. (v) Import of rough diamonds is allowed as replenishment on the basis of licences issued by the Joint Chief Controller of Imports Exports, on the basis of the requisite documents produced by the exporters. Rough diamonds are also allowed to be imported on the basis of Imprest Licence issued by licensing authorities for which the importer has to execute a bond with the Government of India for re-export after cutting and polishing within a prescribed time for a value worked out on a given formula. Detailed procedure in this regard is explained in the Import-Export policy. 3. In view of the position brought about by the above features the export of cut and polished diamonds and gem stones will not, amount to export of "minerals and ores" and hence will qualify for relief under section 80-HHC of the I.T. Act, 1961. 4. The above instruction may be brought to the notice of all officers working in your charge.