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2016 (12) TMI 235 - AT - Income TaxIncome offered to tax under section 42(2)(b) - business for prospecting, etc., for mineral oil - Assessment u/s 143 - nature of receipts - assessment of business income or capital gain - taxability in the hands of the assessee as business income under section 44(2)(b) - classification of income -‘eligible assessee' - selection of assessment year Held that:- The Assessing Officer was justified in directly issuing the assessment order under section 143(3), without first issuing a draft assessment order, even though the assessee was an ‘eligible assessee’ under section 144C, as the Assessing Officer did not propose to make any variations in the income returned by the assessee. The mere fact that the assessee had offered the income of ₹ 14,52,08,040 to tax as business income, by itself, cannot justify the said income being taxed as business income. The receipt of ₹ 14,52,08,400 which was brought to tax in the hands of the assessee as business income under section 44(2)(b) could not be taxed in the hands of the assessee as a business income, since section 44(2)(b) only seeks to reverse, under certain circumstances, the deduction for prospecting expenses already granted to the assessee in computation of business income but no part of the prospecting expenses incurred by the assessee, in respect of the participation interests sold, was ever allowed as deduction in computation of business income. The receipt of ₹ 14,52,08,400, which was in the nature of part consideration for sale of participation interests in PY-1 and CT-OSN-97/1 oil and natural gas exploration site, was liable to be taxed in the hands of the assessee as capital gain. However, such capital gain could be taxed in the hands of the assessee only in the assessment year 2006-07 as transfer of related capital asset, i.e. participation interests in PY-1 and CT-OSN-97/1 oil and natural gas exploration site, took place in the previous year relevant to the assessment year 2006-07. It was for this reason that the said capital gain could not be taxed in the assessment year before us, i.e. 2010-11. In view of the fact that the Assessing Officer has the power, as indeed the corresponding duty, under section 153(6) read with Explanation 2 thereto, to bring the said amount of ₹ 14,52,08,400 to tax in the hands of the assessee for the assessment year 2006-07, we see no reasons to hold that in the event of the said income not being taxed in the present assessment year, i.e. 2010-11, the revenue will be put to undue loss, and that, for this reason, the assessee’s offer for taxability of this capital gain in the assessment year 2010-11 should be accepted.
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