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2019 (9) TMI 97 - AT - Income TaxDisallowance 80IB / 80IC - Manufacturing or production activity or not - crude oil production - AO disallowed the benefit on the ground that, assessee’s oil wells for which the claim is made, is not an new industrial undertaking or enterprise; though there is no dispute that these are plants - assessee was supposed to furnish a separate audit report as prescribed under IT Rules in case of an eligible undertaking or enterprise claiming sec. 80IB deduction to be further accompanied by the relevant profit and loss account / balance-sheet as if the undertaking is a distinct entity. HELD THAT:- Section 80IB(13) imports sec. 80IA(5) and (7) to (12) to be applicable to the eligible business carried out by the eligible undertaking in question. We notice in this backdrop that the clinching legislative’s expression 80IA(7) is “accounts of the undertaking” than a complete set off separate books of account. And sec. 80HH(5), 80I(7), sec. 80IA(7) as well as sec. 80IB(13) also use the very statutory expression “accounts of the undertaking”. We hold in this backdrop that the CIT(A) has rightly followed the hon'ble jurisdictional high court’s decision in taxpayer’s favour. Same is the fate of the Revenue’s next argument that assessee’s each oil well ought not to be treated as a separate eligible undertaking. Hon'ble Gujarat high court’s and this tribunal decision in Nicco Laboratories Ltd. [2015 (3) TMI 986 - GUJARAT HIGH COURT] decided the very issue in assessee’s favour that each oil well can indeed be treated as a separate eligible undertaking Reliance of the revenue on hon'ble Calcutta high court’s judgment in assessee’s case (1991 (6) TMI 17 - CALCUTTA HIGH COURT) treating the oil wells as a composite plant for sec. 32(2A) investment allowance deduction does not apply so far as sec. 80IB deduction claim is concerned. Assessee had used its machines or plant for other purposes as per page-6 of the assessment order dated 30.11.2005 also does not carry merit. We notice first of all that the Assessing Officer had nowhere indicated as to what kind of plant and machinery had been used for other purposes. Be that as it may, hon'ble apex court’s judgment in Bajaj Tempo Ltd. [1992 (4) TMI 4 - SUPREME COURT] held long back that the legislative expression “form” alongwith a pre-fix negative covenant has to be interpreted discussion. We conclude in these facts that the assessee’s oil wells had come into existence after earth digging through rigs. There is thus no violation of the legislative condition of use of old machinery for formation of the undertaking / oil wells. The assessee is therefore held to have used its oil rigs, equipments and tools for bringing into existence the new oil well / eligible undertaking than having formed the same through the old plant and machinery. Assessee had not filed its Form- 10CCB audit report alongwith return or during assessment fails to invoke our concurrence since the Assessing Officer had himself noted that the said report stood duly submitted as per the CIT(A)’s detailed discussion Assessee’s impugned deduction claim u/s 80IB(9) had not sec.80IB(4) - The above former provision grants deduction for seven consecutive assessment years in case of an undertaking located in north eastern region commencing its commercial production as per the due dates prescribed. We wish to reiterate here as per page 214 in the paper book that the assessee’s Form 10CCB had specifically raised sec. 80IB(4) deduction claim for ten assessment years. Pages 226 is the very Form-10CCB report for assessment year 2004-05 in identical manner. We therefore reject the Revenue’s instant grievance which turns out to be against the facts on record. We make it clear that Form 10CCB is a specific document prescribed for claiming the impugned deduction. The Revenue’s above stated arguments that the assessee had not expressly made it clear in its computation about the impugned deduction claim raised u/s. 80IB(4) of the Act is declined. Assessee is engaged in a “mineral based industry” as per the foregoing clinching expression employed as in 14th Schedule. The Revenue’s case that this crude oil production does not amount to mineral based industry as per item No.16 in 14th Schedule of the Act carries no substance since the above stated expression has to be construed in ordinary connotation without having regard the further classification of minerals i.e. ferrous or nonferrous and metallic or non-metallic etc. We also wish to make it clear that there is further no dispute about the impugned statutory provision requiring in assessee to maintain its books of account qua each undertaking to be treated as separate unit in sec. 80IC(7) of the Act incorporating the very legislative intent as is there in sec. 80IB(13) Assessee’s oil exploration activity cannot be taken “manufacture or production” as prescribed in sec. 80IC(2)(b) - Hon'ble apex court’s landmark judgment in CIT vs. N.C.Budharaja and Co. and Another [1993 (9) TMI 6 - SUPREME COURT] held long back that the statutory expression “produce” has wider connotation than the word “manufacture”. The former; when used in juxtaposition with the latter, brings into existence new goods by a process which may or may not amount to manufacture. And that the same also includes in all the by products; intermediary or residuary hon'ble Delhi high court’s decision in HLS India Ltd. [2011 (5) TMI 322 - DELHI HIGH COURT] also holds that whether or not any particular business activity amounts to manufacture or production for the purpose of various incentives schemes under the Act is required to be examined in the light of facts and circumstances in each case. These can be no denial of the fact that crude oil contains hydrocarbons as paraffin, cycloparaffin, napthene and araomatic comprcands which is obtained from beneath the earth’s surface. We reiterate that this assessee admittedly drills / explores crude oil for the purpose of refining the same to various by-products - assessee’s crude oil exploration very much amounts to production going by the relevant facts in the light of the preceding legal position. The Revenue’s instant last argument is also rejected. CIT(A) has rightly granted sec. 80IC(2)(b) deduction to the taxpayer - Decided in favour of assessee.
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