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2015 (3) TMI 986 - HC - Income TaxDeduction u/s 80IB - Petitioner is a foreign company based in Canada entered into what is known as "Production Sharing Contract" (for short the PSC) with the Government of India for exploration, development and production of "mineral oil"Constitutional - validity of the amendment to sub-Section (9) of Section 80-IB and Explanation added to it under the Act by the Finance (No.2) Act, 2009 challenged - exploration, development and production of "mineral oil" - Whether the term “mineral oil" would include Gas? - Petitioner has treated each well/cluster of wells as an "undertaking" for the purpose of claiming deductions under Section 80-IB(9) - Consequent upon the introduction of the Explanation to Section 80-IB(9) by the Finance (No.2) Act, 2009, defining the term "undertaking” to mean "all blocks licensed under single contract" with retrospective effect from 1.4.2000, by an Order dated 7th September 2009, the claim of the Petitioner for the Assessment Year 2006-07 under Section 80-IB(9) was disallowed by the Assessing Officer. Held that:- In the absence of specific wordings in the Statute, to draw a conclusion that only undertakings engaged in the commercial production of 'mineral oil" other than "natural gas" will be entitled to deductions of profits and gains under the above mentioned sub-section, is wholly incorrect. For the aforesaid reasons, we hold that the insertion of sub clause (iv) to Section 80-IB(9) of the Act by the Finance (No.2) Act, 2009 cannot be interpreted to mean that the term "mineral oil" as used in Section 80-IB does not include natural gas and cannot result in denial of the benefit of deduction under Section 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to VIIIth round of bidding. In view of the decision of the Constitutional Bench of the Apex Court, the term "mineral oil" includes and has always included "natural gas". The benefits of deductions under Section 80-IA were expressly made available with effect from 1.4.1999 by amending the then existing Section 80-IA. Later on Section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an "undertaking". Neither Section 80-IA, Section 80-IB nor the provisions of PSC provided that the "undertaking" would be construed as a whole Block. The Apex Court in Gold Coin Health Food Pvt. Ltd. (2008 (8) TMI 5 - SUPREME COURT ), held that even if the statute does contain a statement to the effect that the amendment is clarificatory or declaratory, that is not the end of the matter. The Court has to analyse the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory provision. Therefore, the date from which the amendment is made operative does not conclusively decide the question. The Court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether amendment is clarificatory or substantive. Same principle would apply where the legislature had made a statement in the statute that it would apply retrospectively. We have examined the history of enactment for mineral oil, the old and the amended provisions. We are satisfied that the Explanation added to Section 80-IB(9) has levied income tax on all wells/cluster of wells and all undertakings, except the first one which commences commercial production for which still seven years tax holiday is available. The legislature or the Parliament had by inserting the Explanation had widened the main Section 80-IB(9) and imposed an altogether new tax by widening the tax net which would be applicable for different periods depending upon the date of starting commercial production would be substantive change in the law with different tax liability. Such substantive provision could only be construed prospective in operation. For the reasons given above, we are of the considered opinion that the amendment made in Section 80-IB(9) by adding an Explanation was not clarificatory, declaratory, curative or made “small repair” in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT, therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. We have no hesitation to hold that the Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down. Therefore, for the reasons given above, we are of the considered opinion that the Explanation added to Section 80-IB(9) by amendment is substantive law and could not apply retrospectively. The Explanation added to Section 80-IB(9) breaches the rule of law and is arbitrary being violative of Article 14 of the Constitution of India is struck down. In the result, both the writ petitions succeed and are allowed. The Explanation to Section 80-IB(9) of the Act is held to be ultra vires to Article 14 of the Constitution of India. Rule is made absolute. - Decided in favour of assessee.
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