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2011 (8) TMI 428 - AT - Income TaxExpenditure incurred on bidding for exploration - Capital expenditure or revenue expenditure - Exploration and production of oil and gases as revenue expenditure -the assessee were not in the nature of an independent business, but it was part of the existing business carried on by it under the control and supervision of the same management - The activities were inter-connected and there was no inter-lacing of funds and resources - The activities were carried out as inseparable from the existing line of business - Therefore, in the light of the decisions of the Supreme Court in the cases of Produce Exchange Corporation Ltd. v. CIT [1970 (4) TMI 18 - SUPREME Court], these expenses need to be allowed as revenue in nature - the impugned expenditure incurred during the previous year for setting up refinery. Depreciation on the lease assets - Held that:- depreciation claim of assessee being disallowed - Assessing Officer not to tax the principal amount of lease rental DTAA - Tax liability - Residential status - There is no dispute that the assessee is having a permanent establishment in Oman and is clearly liable to tax under the provisions of Income-tax law in Oman - the provisions of DTAA override the provisions of the Income-tax Act - In the light of the ratio of the decision laid down by Hon'ble Supreme Court in CIT v. P.V.A.L. Kulandagan Chettiar [2004 (5) TMI 8 - SUPREME Court], the income earned by the assessee from its Oman Branch cannot be added as income for computing the taxable income in India - Do not find any infirmity in the order of learned CIT(A) - Held that the income from business carried on at Oman and Qatar cannot be subjected to tax in India. Interpretation of provisions of DTAA - The expression used in Article 7 of the DTAA between India and Oman is "may be taxed", while the words used in Article 7 of India Qatar DTAA is "may also be taxed". Could there be different consequences because of the above difference in the language of the DTAA? - it cannot be said that the expression "may also be taxed" used in the DTAA gave option to the other Contracting States to tax such income. As laid down in the decision in the case of Pooja Bhatt [2008 (10) TMI 251 - ITAT BOMBAY-L] contextual meaning has to be given to such expression. - the contention of the revenue that the expression "may also be taxed in other State" giving the option to the other State and the State of residence is not precluded from taxing such income cannot be accepted. Interest under section 36(1)(iii) - It is not in dispute that the assessee company had been using the jetty purchased for the purpose of the marketing business and that income earned there from was also offered for tax - The CIT(A) has found that there was no evidence of use of own funds for purchase of jetty - The revenue has itself allowed depreciation on jetty in the past -deduction on account of interest allowed.
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