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NIKO RESOURCES LIMITED Versus UNION OF INDIA

2015 (3) TMI 986 - GUJARAT HIGH COURT

Deduction u/s 80IB - 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 .....

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"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 producti .....

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ndertaking". 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 clar .....

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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 .....

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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 .....

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NO. 10903 of 2009 - Dated:- 26-3-2015 - MR. VIJAY MANOHAR SAHAI AND MR.R.P.DHOLARIA, JJ. For The Petitioner : S.N. Soparkar , Sr. Counsel Tanvish Bhatt, Mrs. Swati Soparkar and Bandish S. Soparkar, Advs. For The Respondent : Shakeel A. Qureshi, Central Govt. Standing Counsel, Mihir Joshi, Sr. Counsel Nitin K. Mehta and Sudhir Mehta JUDGMENT : 1. The Petitioner is a foreign company based in Canada and has set up a project office in India with the permission of Reserve Bank of India. The Petitione .....

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oduction of "mineral oil". The PSC specifies the area over which the Petitioner has been given such rights. PSC defines the Contract Area as a Block. One such PSC was entered into on 23rd September, 1994 and another on 17th July, 2001 for the exploration, development and production of mineral oil in the Hazira and Surat block respectively. The Petitioner has been producing crude oil and natural gas from such Blocks. 2. The Petitioner has been claiming benefit of deduction of 100% of th .....

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the amendment in the present proceedings read as under:- 37. In Section 80-IB of the Income-tax Act, - (a) for sub-Section (9), the following sub-Section shall be substituted and shall be deemed to have been substituted with effect from the 1 s t day of April, 2000, namely :- '(9) The amount of deduction to an undertaking shall be hundred per cent, of the profits, for a period of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfills any of t .....

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nsed under a single contract, which has been awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No . O- 19018/22/95-ONG.DO.VL dated 10 th February. 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single "undertaking".': (a) in sub-Section (9), as so substituted, - (A) in clause (iii), after the words, figur .....

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tion Licensing Policy announced by the Government of India vide Resolution No.0- 190l8/22/95-ONG.DO.VL dated 10 th February, 1999 and begins commercial production of natural gas on or after the 1 s t day of April, 2009; (Emphasis supplied by us) 4. We are concerned with the amendments which have been highlighted above. The relevant amendments in question are in two parts. 5. The first part is the insertion of the Explanation to Section 80-IB(9) with retrospective effect from the 1st day of April .....

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s commenced commercial production of mineral oil on or after 1st April 1997. 6. The second part of the amendment is the introduction of a new sub clause (iv) to Section 80-IB(9) by which the benefits of the deduction under 80-IB(9) have been conferred to persons engaged in commercial production of ''natural gas" In blocks licensed under the VIIIth Round of bidding under the New Exploration and Licensing Policy (NELP) and who begin commercial production of natural gas on or after 1st .....

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e from time to time as is relevant for the present proceedings is given in the following paragraphs. 9. Section 80-IA as it stood with effect from 1.4.1999 under which the tax benefits were available is reproduced below:- "80-IA(1) where the gross total income of an assessee includes any profits and gains derived by on any business of an industrial undertaking or a hotel or commercial production or refining of mineral oil in the North-Eastern Region or any part of India on or after 1st day .....

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ch begins commercial production or refining of mineral oil in the North-Eastern Region or in any part of India on or after the 1st day of April, 1997: Provided that the provisions of this Section shall apply in case of refining of mineral oil where the undertaking begins refining on or after the 1st day of October, 1998" "(5)(v) The amount referred to in sub-Section (i) shall be in the case of undertaking referred to sub-Section (4E) hundred percent of profits and gains derived from su .....

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ness being herein after referred to as the eligible business), there shall in accordance with and subject to the provision of this Section, be allowed, in computing the total income of the assesses, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this Section." Sub-clause(9) : The amount of deduction to an undertaking which begins commercial production or refining of mineral oil shall be hundred percent of .....

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om 1.4.2000, and as amended, the said Section reads as under :- "Sub-clause (9) : The amount of deduction to an undertaking shall be hundred percent of the profits for a period of seven consecutive assessment years, including the initial assessment year, if such undertaking fulfills any of the following, namely:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before the 1st day of April 1997; (ii) is located in any part of India and has b .....

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of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single "undertaking"." 13. Paragraph 102 of the Budget speech of the Finance (No.2) Bill, 2009 reads as under :- "...Further I also propose to retrospectively amend the provisions of the said Section to provide that "undertaking" for the purpose of Section 80-IB(9) will mean all blocks awarded in any single contract." 14. The Me .....

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parately for each such well. However, this view is against the legislative intent. Accordingly, it is proposed to amend sub-Section (9) by inserting an Explanation so as to clarify that for the purposes of claiming deduction under sub-Section (9), all blocks licensed under a single contract, which has been awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O- 19018/22/95-ONG.DO.VL dated 10th February, 1999 or has been awarded in pursuance o .....

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ill, 2009 provide as under :- "It is further proposed to provide by way of an Explanation that for the purposes of claiming deduction under this sub-Section, all blocks licensed under a single contract which is, awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG.DO.VL. dated 10th February 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by the Central or State Government .....

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censed under a single contract, which has been awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG.DQ.VL dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single "undertaking"." 17. At this stage, it would be useful to briefly set out the history of the Government' .....

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ial production of mineral oil in any part of India on or after the 1st day of April 1997 was first introduced by Finance Act 1998 in Section 80-IA of the Act. (iii) The Government, in order to attract private investments in the mineral oil sector, formulated the New Exploration and Licensing Policy (NELP) which came to be notified in the official gazette on 10th February, 1999. Among other things, the NELP stated that a seven year tax holiday from the date of commencement of commercial productio .....

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nt of inconsistency between this guide and any enactment or rules, the relevant Act or the Rule shall apply. Paragraph 5 of the guide deals with the Income Tax provisions in relation to PSC participants. Sub paragraph 5 (11) reads as under:- "Under Section 80-IA of the Income Tax Act, 1961, PSC Participants who begin Commercial Production of Petroleum in any part of India on or after 1st April 1997 shall be entitled to claim deduction of 100% of their profits and gains derived from such bus .....

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oduction commences from a field and the date of commencement of commercial production shall be intimated by the contractor to the Government of India in writing." 19. The word "undertaking has not been defined in either Section 80-IA or Section 80-IB of the Act and the principles and attributes of what constitutes an "undertaking", for the purposes of these Sections have been laid down in a series of judgments of the Apex Court and other High Courts of the country starting fr .....

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. On the basis that a well/ cluster of wells is an undertaking , the Petitioner has claimed the benefits of deduction of the profits and gains from such 'undertakings' which commenced production after 1.4.1997 under Section 80-IB(9). This claim was disallowed by the Assessing Officer for Assessment Year 2001-02 relating to the Hazira block on the ground that since commercial production from the Hazira block (even though from a different well) commenced before 1.4.1997, it did not satisfy .....

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duction under Section 80-IB(9) in respect of profits derived from each such well/cluster of wells for a period of seven consecutive years from the commencement of the commercial production, in each such undertaking, consisting of a well/cluster of wells. The ITAT thereafter allowed similar claims for the Assessment Years 2000- 01, 2002-03 and 2003-04. The Respondent has gone in appeal against the orders of ITAT before this Court, which is pending. 21. Consequent upon the introduction of the Expl .....

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itrary and unreasonable and thus ultra vires Article 14 of the Constitution of India as well as on other grounds. 23. We have heard Mr. S.N. Soparkar, learned Senior Counsel assisted by Mr. Tanvish Bhatt, learned counsel appearing for M/s. Wadia Ghandy and Company for the Petitioner in Special Civil Application No.13134 of 2009 with learned counsel Mrs. Swati Soparkar and Mr. Bandish S. Soparkar appearing for Petitioner in Special Civil Application No.10903 of 2009, Mr. Mihir Joshi, learned Seni .....

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009 to be the leading writ petition. 25. Mr. S. N. Soparkar, learned Senior Counsel for the Petitioner has contended that this amendment is not merely clarificatory in nature, but is a substantive retrospective amendment and inasmuchas it takes away vested rights, it is arbitrary and unreasonable and is liable to be struck down as being ultra vires to Article 14. 25.1 The other contentions of the learned Senior Counsel for the Petitioner are set forth below. 25.2 According to learned Senior Coun .....

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urances to the prospective participants. Under the NELP, the Central Government invited offers for exploration of mineral oil for every block and commenced the process of entering into a PSC with the successful bidders who is nomenclature as the contractor under the PSC. 25.3 The learned Senior Counsel drew the attention of the Court to the Notice Inviting Offers under the NELP, where under the heading "Main Features of the Terms Offered", It was stated that "Income Tax Holiday fo .....

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discovery is announced and declared to be a "commercial discovery", an elaborate process has been laid down in the PSC not only for approving it as a commercial discovery, but right down to the number of wells which the contractor was to drill. For this purpose a separate development plan for development of each field is prepared by the contractor and is approved by a body known as the Management Committee in which the Government has the veto power. He submitted that each of such well .....

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duction. The learned Senior Counsel further contented that exploration, development and production, are phase-wise for every block and it would not be right to state that the period of seven years for the entire block would commence from the date of commercial production in the very first well, when the other areas of the block were still under exploration or development phase as stipulated in the PSC. The term undertaking, therefore, cannot be construed to mean the entire block to reckon the pe .....

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to claim deduction of 100% of their profits and gains derived from such businesses for initial seven years commencing from the first year of Commercial Production, the phrase "commercial production has to be read and understood in the context of the field in respect of which development plan had been approved and not the entire block. 25.5 Reading of various clauses in the PSC clearly demonstrate that the term "undertaking" was never construed to mean the entire block area. Each .....

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a which may encompass one or more commercial discoveries. The Development Area in a Block can be more than one and each Development Area may be independent and each such area may be identified and developed in phased manner. The definition of the term "Commercial Production" read with the definition of the same word in the Petroleum Tax Guide clearly shows that Commercial Production has to be read in the context of a Field which can be a Development Area. The definition of the term &qu .....

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e Contractor and the Government. Several other definitions such as "Discovery", "Discovery Area", "Exploration Operations", "Exploration Period", "Exploration Phase", "Field", "Production Cost", "Well" were referred to emphasize this point. 25.6 It was further contended that it has been stipulated in the PSC, that the Central Government would closely scrutinize and approve every stage of exploration, development and .....

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se in approving more than one Commercial Discovery in each Development Area of a Block and cannot now introduce by retrospective amendment, the concept that an entire Block would be a single undertaking, and that such an amendment is liable to be struck down as unreasonable and arbitrary. 25.7 The learned Senior Counsel for the Petitioner cited various authorities which are for the purposes of the benefits of the Act defining the term "undertaking'" which, go to show that a Develop .....

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blishment of a new industrial undertaking, expands his existing business which he certainly does, would not on that score deprive him of the benefits under Section 15C of the Act. The true test is not whether the new industrial undertaking connotes expansion of the existing business of assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. An undertaking is formed out of the existing business if the physical identity of the ol .....

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ntended that the introduction of the Explanation in Section 80-IB(9) by Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000 is a substantive amendment which takes away a vested right of the Petitioner. It is arbitrary, unreasonable and ultra vires to Article 14 of the Constitution of India and is liable to be struck down. He further contended that the Explanation has been introduced solely to supersede various judgments of the tribunals/courts which have rightly interpreted and held .....

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counsel :- (i) When a retrospective amendment is arbitrary and unreasonable and imposes a unforeseen financial burden, it is liable to be struck down as violative of Article 14. Three factors determining whether a retrospective amendment is so unreasonable or confiscatory that it violates Article 14 and 19 of the Constitution are (i) the context in which retrospectlvity was contemplated, (ii) the period of such retrospectivity, and (iii) the degree of any unforeseen or unforeseeable financial b .....

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be struck down. Cawasji & Co. v. State of Mysore 150 ITR 648); Rai Ramakrishna and others v. State of Bihar 50 ITR 171; National Agricultural Cooperative Marketing Federation of India Ltd v. Union of India (2003) 5 SCC 23. (iii) An Explanation cannot take away a statutory right given to any person under a statute. S. Sundaram Piliai and others v. V. R. Pattabiraman and others (1985) 1 SCC 591. (iv) An insertion of an Explanation which is really clariflcatory in nature even though retrospect .....

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t any reason. Tata Motors v. State of Maharashtra AIR 2004 SC 3618. (vi) Taxing statute is not immune from challenge under Article 14, State of Kerala v. Haji K. Kutty AIR 1969 SC 378; Ayurveda Pharmacy v. State of Tamil Nadu (1989) 2 SCC 285. 25.11 It was further contended that although included by the amendment as an explanation, the real purport of the amendment was not to explain any provision but to retrospectively amend the statute in a manner so as to take away the rights vested in the Pe .....

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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 meaning of the word "undertaking" was always clear as laid down by catena of judgments including that of the Apex Court. Thus, the Government as well as the Petitioner clearly understood the meaning of the term "undertaking" as essentially an independent economic u .....

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oner but in a given case in which provisions of Article 19 can be properly invoked, this would be applicable. 26. On the other hand, Mr. Mihir Joshi, learned Senior Counsel for the Respondent No.2 contended that any legislation cannot be struck down on the basis of Article 14 alone. In this case, there is no vested right whatsoever in the Petitioner and even if the Petitioner had a vested right, it can be taken away by the legislature and the test before the Court can only be whether it is reaso .....

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reference to commercial production from a well or cluster of wells while referring to the tax holiday. The NELP also states the Tax Guide is only to facilitate the investors and states that in case of any inconsistency between the Tax Guide and the provisions of any legislation, the provisions of the relevant Act would prevail. Clause 3 of the NELP states that a Block will be carved out for offering. The Contract Area as defined in the PSC means the entire area of the block and not one or a clu .....

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indicates that the law can be changed at any time and the deductions as per the law as may be amended from time to time only would be available to the Petitioner. Further, Clause 17.10 of the PSC provides that if, due to any change in law dealing with Income Tax or any other tax, which results in a material change to the expected economic benefits accruing to any of the parties after the date of execution of the Contract, the parties shall promptly consult in good faith to make necessary revisio .....

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t arisen as yet. The Respondents have not admitted these rights at any time during the assessment proceedings. A vested right can only accrue by an action of any authority in a positive manner or a right acquired by a final adjudication by a competent court. The only vested right in this case is the benefit conferred by the Section for seven years which has not been taken away. 26.3 The Explanation, according to the learned Senior Counsel, has been inserted by the legislature to resolve a disput .....

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ing unreasonable. 26.4 The contention of the Petitioner that the Central Government always controlled the exploration, development and production is not correct. The PSC provided discretion to the Petitioner to deal with discoveries, development and working of the Development Area. Under the PSC, the fact that the Petitioner has the right to retain areas rich in mineral oil after the exploration is over is a pointer to the fact that the total area retained by the contractor is an "undertaki .....

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which were producing goods and these cannot be equated to the facts and circumstances in cases of mineral oil exploration, development and production. 26.5 The learned Senior Counsel for the Respondent has contended that provisions of Article 19(l)(g) are not available to the Petitioner as no citizen of India is a party to the petition. 26.6 The learned Senior Counsel further contended that Article 14 deals only with discrimination and provides for equality before the law. The contentions of the .....

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ities should be viewed with greater latitude. R. K. Garg v. Union of India (1981) 4 SCC 675. (ii) Only palpable arbitrariness can be faulted as discriminatory and violative of Article 14. Shashikant Laxman Kale v. Union of India (1990) 4 SCC 366. (iii) The burden of proving discrimination is more in the case of taxing statutes. Laws relating to economic activities should be viewed with greater latitude than laws touching civil rights. Associated Cement Companies Ltd v. Govt. of AP and another (2 .....

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e the statute and such curative statute is always valid when there is no finality in the judicial procedure. National Agricultural Co-op Marketing Federation of India v. Union of India (2003) 5 SCC 23. (viii) Even In the case of pending assessment, if the legislature makes explicit what was implicit, then the same is not ultra vires. Escorts Limited and another v. Union of India (1993) 1 SCC 249. (ix) Mere arbitrariness is not sufficient, it requires palpable arbitrariness for the court to inter .....

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of the Urban Land Tax and Others v. The Buckingham and Camatic Co. Ltd. (1969) 2 SCC 55. (xii) The factors which are generally considered in determining whether a retrospective amendment is so unreasonable or confiscatory that it violates are (i) the context in which retrospectivity is contemplated (ii) the period of such retrospectivity and (iii) the degree of any unforeseen or unforeseeable financial burden imposed for the past period. The period of retrospectivity is irrelevant when the amend .....

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s contended that the amendment is not a colourable exercise of power since the tribunal s judgments are not statutes and the Respondent has preferred appeals in the High Court and the amendment is in the nature of a clarification to a pending dispute. 27.2 He further contended that assuming that the parties agreed to treat each well as an "undertaking'' and the amendment was contrary to the terms of a contract, such as this, even then it would not invalidate the amendment. A contrac .....

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dustry norms and technical realities. The terms "oil and gas" are always used in conjunction. The income Tax Department has interpreted the insertion of sub clause (iv) to Section 80-IB(9) in this manner and has denied the benefit to the Petitioner on this count. If this is the interpretation, this amendment artificially restricts the tax benefit under Section 80-IB(9) of the Act only to commercial production of natural gas in the NELP VIIIth round of bidding as opposed to the position .....

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the commercial production of natural gas in blocks licensed under pre NELP VIII rounds of bidding. Therefore, this amendment is arbitrary and unreasonable and liable to be struck down as being ultra vires to Article 14. 29. Mr. Mihir Joshi, learned Senior Counsel appearing for the Respondent No.2, has forcefully submitted that it has been the consistent position of the Revenue that mineral oil does not include natural gas. He further contended that whenever legislature desired so, it had used th .....

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Mihir Joshi, learned Senior Counsel and has adopted it as part of his argument. 31. We have examined the rival contentions and according to us the following issues fall for consideration in this matter:- (i) Whether the insertion of the Explanation to Section 80-IB(9) of the Income Tax Act, 1961 by Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000 explaining the meaning of the term "undertaking" is unconstitutional and ultra vires to Article 14 of the Constitution of In .....

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ntracts entered into prior to NELP VIII on an interpretation thereof that the term "mineral oil" would not include natural gas since the benefit was available only to undertakings engaged in commercial production of "mineral oil" rendered the newly added sub clause (iv) unconstitutional and ultra vires Article 14 of the Constitution of India? (iii) Whether the Petitioner has any accrued or vested right? Whether the term mineral oil" would include Gas ? 32. We propose to .....

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petroleum and natural gas, The Explanation qualifies the applicability only to Section 42 of the Act. It is therefore contended that 'mineral oil" under 80-IB should be so construed so as not to include natural gas and the explanation under Section 42 cannot be looked at in construing the provisions of Section 80-IB. 34. This contention would merit consideration if mineral oil has either been defined under the Act or has acquired a natural, commercial or interpretative meaning so as to .....

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ons of this Section in the manner aforesaid, Section 80IB(9)(ii) has remained unamended. 35. The question whether natural gas is encompassed in the term mineral oil" came up for consideration before a Constitutional Bench of the Apex Court in the case of Association of Natural Gas and others v. Union of India and others, (2004) 4 SCC 489. The question arose as to the legislative competence of the State to enact laws on natural gas in terms of Entry 25 of List II of the Seventh Schedule of t .....

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ads as follows :- Gas and gas works." 35.3 The State contended that the expression 'gas' in Entry 25 List II takes within its ambit "natural gas", Natural gas is widely used as energy source and State alone would be in a position to exploit the resources and distribute them to the consumer. Natural gas is classified in several broad categories such as wet gas, lean gas, dry gas, sour gas and sweet gas. State also contended that natural gases are not associated with any pet .....

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compass the natural gas or its derivative forms." 35.5 The relevant portions of this decision is reproduced below:- "20. In Kirk-Othomer Encyclopedia of Chemical Technology, (Third Edition), Vol, 11 page 630, 'Natural gas' is defined as a naturally occurring mixture of hydro-carbon and nonhydrocarbon gases found in the porous geologic formations beneath the earth's surface, often in association with petroleum. 22. Natural gas is found in areas of the earth that are covered .....

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Natural gas is classified in several broad categories based on the chemical composition, which are; (1) wet gas contains condensable hydrocarbons such as propane, butane, and pentane; (2) lean gas denotes an absence of condensable hydrocarbons; (3) dry gas is a gas whose water content has been reduced by dehydration process; (4) sour gas contains hydrogen sulfide and other sulfur compounds; and (5) sweet gas denotes an absence of hydrogen sulfide and other sulfur compounds. Natural gas sold to t .....

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s greatly. Consequently, no single composition of petroleum can be defined. It is not surprising that the composition varies, since the local distribution of plant, animal and marine life is quite varied and, presumably, was similarly varied when the petroleum precursors were formed. 28. As per 'The New Book of Popular Science' Vol. 2, petroleum is an oily, inflammable, liquid made up mostly of hydrocarbons - compounds containing only hydrogen and carbon. The hydrogen content of petroleu .....

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adually they were converted into layers of sedimentary rock. The plant and animal remains contained within them were transformed into petroleum and natural gas. The details of this transformation are not quite clear. 30. Gas and oil are found in huge subterranean caverns. They both occur in minute pores of such rocks as sandstone and limestone. They are held captive under great pressure by surrounding rock formations that are impervious to seepage. Finally they are released when the shifting of .....

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in the form of a vapor. "A gas characterized by hydrocarbons in mixture, occurring naturally in the crust of the earth, obtained by drilling, and piped to cities and villages, industrial and commercial centers, for use in heating, illumination and other purposes." "35. All the materials produced before us would only show that the natural gas is a petroleum product. It is also important to note that in various legislations covering the field of petroleum and petroleum products, eit .....

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from the Latin term petra-oleum. (petra-means rock or stone and oleum-means oil). Thus, Natural Gas could very well be comprehended within the expression 'petroleum' or petroleum product." "37. A survey of the various legislations on the topic would show that the term 'petroleum' or 'petroleum products' has been given a wide meaning to include natural gas and other similar products. 38. In the Pipelines Act, 1962 of the United Kingdom, 'petroleum' has b .....

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eral oil or relative hydro-carbon and natural gas existing in its natural condition in strata, but does not include coal or bituminous shales or other shales or other stratified deposits from which oil can be extracted by destructive distillation. Petroleum Act, 2000 (Sec.4), Australia "Petroleum" means a naturally occurring substance consisting of a hydrocarbon or mixture of hydrocarbons in gaseous, liquid or solid state but does not include coal or shale unless occurring in circumsta .....

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ns passed by the Indian Parliament and the relevant rules also would show that 'natural gas' was treated as mineral oil resource or petroleum product. 1. The Oil Fields (Regulation & Development) Act, 1948. 3(c) "Mineral Oils" include natural gas and petroleum. 2. Mines Act, 1952 2 (jj) "minerals" means all substances which can be obtained from the earth by mining, digging, drilling, dredging, hydraulicking, quarrying or by any other operation and includes mineral .....

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e which may be extracted from coal, shale, or other rock by the application of heat or by a chemical process." 3. (n) "petroleum product" means any commodity made from petroleum or natural gas and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas gasoline, naphtha, distillate, gasoline, kerosene, waste oil, blended gasoline, lubricati .....

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natural gas." 2. (m). "petroleum product" means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas, gasoline, naphtha, distillate gasoline, kerosene, bitumen, asphalt and tar, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by pro .....

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all these factors lead to the inescapable conclusion that "natural gas" in raw and liquefied form is petroleum product and part of mineral oil resource, which needs to be regulated by the Union. 35.6 The Constitutional Bench, after considering "natural gas is a mineral in the form of vapor"; "a gas characterized by hydrocarbon in mixtures"; "Natural gas is found in areas of earth covered by sedimentary rocks. Gas and petroleum being less dense than water presen .....

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e word 'petroleum' or 'petroleum products' has been defined in an inclusive way, so as to include natural gas, In Encyclopedia Britannica, 15th Edn. Vol. 19, page 589 (1990), it is stated that "liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten the expression 'petroleum and natural gas' to 'petroleum' when referring to both. The word petroleum literally means 'rock oil', it originated from th .....

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t independent of the production of other petroleum products; though from some wells natural gas alone would emanate, other products may emanate from sub terrain chambers of the earth, But all oil fields explored for their potential hydrocarbon." (iv) In para 42 it held that the legislative history and the definition of 'petroleum', 'petroleum products' and 'mineral oil resources' contained in various legislations and books and the national interest involved in the eq .....

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finition of mineral oil under Section 80-IB of the Act, any reference to mineral oil in its natural, commercial and technical sense will include petroleum products and natural gas. The decision rendered by the Apex Court in Association of Natural Gas case would squarely apply. In the absence of the definition under Section 80-IB of the Act, if reliance has to be placed on allied enactments passed by Parliament, this would also lead to a clear conclusion that mineral oil includes natural gas. 35. .....

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s within itself petroleum products and natural gas. The contention of the Respondent that petroleum products and natural gas have been made part of mineral oil only through inclusive provisions contained in Sections 42, 44BB and 293A and its conspicuous absence in section 80-IB has to be inferred that the purpose of Section 80-IB, mineral oil would not include petroleum products and natural gas. This contention of the learned counsel for the Respondent needs to be rejected for the following reas .....

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in time after considering the technical, commercial and legislative meaning have concluded that mineral oil would encompass within itself petroleum products and natural gas. (iv) In the light of the judgment of the Constitutional Bench of the Apex Court, the Explanation in these Sections have to be read and referred to only as abundant caution. 35.9 If Explanation has to be given preference then it would amount to reading or rewriting the decision of the Apex court that mineral oil in its natura .....

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ure and the advancement in science in the use of liquefied natural gas. The contention of the State that natural gas do not fall within the genre of petroleum products and mineral oil stood rejected by holding that natural gas in raw and liquefied form is petroleum product and part of mineral oil resources. 35.11 Section 80-IB of the Act has not defined mineral oil nor has it excluded petroleum products and natural gas. It is not alien to tax laws to have scripted definition to suit a particular .....

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Before parting with this issue, we need to examine one more aspect. The Constitutional Bench resolved the conflict as to the domain competence to legislate on natural gas by holding that natural gas is nothing but part of mineral oil and the exclusive competence to regulate is vested only with the Union or Parliament and the power of the State are completely denuded. It is by virtue of its power under Entry 53, Central Government has entered into the Production Sharing Contract (PSC) with partie .....

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. The insertion of sub clause (iv) to Section 80-IB(9) does not militate against meaning attributed to the expression "mineral oil" by the Apex Court, Entry 53 of List I does not refer to Natural Gas separately. The Apex Court has also read it only as part of mineral oil, but for which Parliament would not have had the power and competence to legislate. Various enactments such as the Oil Fields (Regulation and Development) 1948, Mines Act 1952, The Mines and Minerals (Development and R .....

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Parliament could not have legislated in any manner on any issues relating to Natural Gas which position has been made explicit. 35.14 Sub-clause (iv) to Section 80-IB(9) was introduced by the Finance (No.2) Act 2009 with effect from 1.4.2010. Notes on Clauses to the Finance Bill 2008 and 2009, the actual amendments to Section 80-IB(9) made through Finance Bill 2008 and Finance Bill 2009 along with the statements laid on the floor of the Parliament by the Hon'ble Finance Minister while movin .....

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eral oil. The term "mineral oil" does not include petroleum and natural gas, unlike other sections of the Act. The deduction under this subsection is available to an undertaking for a period of seven consecutive assessment years including the initial assessment year - (i) in which the commercial production under a production sharing contract has first started; or (ii) in which the refining of mineral oil has begun. It is proposed to insert a new proviso in subsection (9) of section 80- .....

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of mineral oil on or after the 1st day of April, 2009, no deduction under this section shall be allowed in respect of such undertaking unless such undertaking fulfills ail the following conditions, namely :- (i) It is wholly owned by a public sector company or any other company in which a public sector company or companies hold at least forty-nine per cent of the voting rights; (ii) It is notified by the Central Government in this behalf on or before the 31st day of May, 2008; and (iii) It begin .....

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aken a view; the assessees have taken another view. The disputes go back to assessment year 2001-02. The disputes are under adjudication before different tax authorities. In my view, it is not correct to resolve these disputes by debate in Parliament We should allow the disputes to be resolved in the normal course by the tax tribunals and the courts. Nevertheless, some doubts have arisen because of the notes on clauses attached to the Finance Bill. I wish to clarify these doubts. The statement i .....

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at the benefit of Section 80IB(9), as finally interpreted by the courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding..." 35.16 Budget speech of the Finance Minister while introducing Finance (No.2) Bill, 2009 :- "102. Madam Speaker, in the context of the geo-political environment, it is necessary for us to create our own faculties for energy security. Accordingly, I propose to extend the tax holiday under Section 80IB(9 .....

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o provide that "undertaking" for the purposes of Section 80-IB(9) will mean all blocks awarded in any single contract." 35.17 Notes on clauses to Finance (No.2) Bill 2009: "Clause 37 of the Bill seeks to amend Section 80-IB of the Income Tax Act, which relates to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Sub-section (9) of the said Section provides for deduction in respect of profits and .....

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oduction of mineral oil before the 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997; (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998. It is further proposed to provide by way of an Explanation that for the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract which is, awarded und .....

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quent years. It is further proposed to amend clause (iii) of the said sub-section (9) as so substituted to provide that the benefit of deduction under the said subsection shall be available if the undertaking is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 but not later than the 31st day of March, 2012. This amendment will take effect retrospectively from the 1st April, 2009. It is also proposed to further amend the said sub-section (9) as .....

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II ) and begins commercial production of natural gas on or after the 1st day of April, 2009. This amendment will take effect from 1st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years. 35.18 Amendment to Section 80-IB(9) by Finance (No.2) Act, 2009 :- "37. In Section 80-IB of the Income-tax Act,- (a)for sub-section (9), the following sub-section shall be substituted and shall be deemed to have been substituted with effect from the 1st .....

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ral oil on or after the 1st day of April, 1997; (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998. Explanation.- For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG.DO.VL dated 10th February, 1999 or has been awarded in pursuance of any law for .....

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of April, 2010, namely :- (iv) is engaged in commercial production of natural gas in blocks licensed under the VIIIth Round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O- 19018/22/95-NG.DO.VL dated 10th February, 1999 and begins commercial production of natural gas on or after the 1st day of April, 2009. (v) is engaged in commercial production of n .....

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natural gas or that the benefits of Section 80-IB have been extended to natural gas for the first time with effect from 1.4.2009 by virtue of insertion of sub clause (iv) to Section 80-IB(9). At the best, sub clause (iv) has to be construed to mean that the benefit would also be available for NELP VIII bidders who satisfy the conditions set out in the said sub clause. 35.20 In the absence of specific wordings in the Statute, to draw a conclusion that only undertakings engaged in the commercial .....

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ion 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". Whether the Petitioner has any accrued or vested right ? 36. We may now consider the third question as to whether the Petitioner has any accrued or vested right. One of the fundamental .....

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ve control of the host country, along with the international treaties or agreements. Even, if the foreign investor has no fundamental right, let them know, that the rule of law prevails in this country. The message should be loud and clear, that rule of law exists in our country. 36.1 Income-tax Act, 1961, do not explicitly or impliedly forbid as to how a company and the Government should enter into agreements or contracts. In absence of contract, there is no vested interest which requires the c .....

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person . The expression person includes any entity, not necessarily a human being, to which rights or duties may be attributed. In ordinary, popular and natural sense word person means a specific individual human being . But in law the word person has a slightly different connotation, and refers to any entity, which is recognized by law as having the rights and duties of a human being. Thus the word person , in law, unless otherwise intended, refers not only to a natural person (male or female .....

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) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. The term person is not defined in the Constitution. But Article 367 of the Constitution provides that definitions contained in the Section 3 (42) of General Clauses Act, 1897, apply for the interpretation of the Constitution. The defin .....

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as otherwise may require. Section 3 of the General Clauses Act, 1897 itself says that unless there is anything repugnant in the subject or context the term person shall include any company or association or body of individuals, whether incorporated or not. The legislature is not denuded of its competency to define the term person differently from the definition of that term in the General Clauses Act, 1897. It is not uncommon practice for Parliament or the State Legislature to define person in t .....

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ly for the purposes of each of the enactments and different from the one in the General Clauses Act and create an artificial unit. The definition of person in the General Clauses Act would not operate as any fetter or restriction upon the powers of the State Legislature to define person and adopt a meaning different from as defined in the General Clauses Act. Karnataka Bank Limited v. State of A.P., (2008) 2 SCC 254. 36.3 The maxim reddendo singular singulis will apply to the interpretation of t .....

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des any entity, not necessarily a human being, to which rights or duties may be attributed. Under the Act, and Article 300A the expression person includes a company, an association of persons or a body of individuals, whether incorporated or not and every artificial juridical person. Therefore, the Petitioners would be person covered under Article 300A of the Constitution. 36.5 The Apex Court had the occasion to consider as to what is accrued vested right in J. S. Yadav v. State of U.P and anoth .....

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sent interest; mere expectancy of future benefits, or contingent interest in property founded on anticipated continuance of existing laws, does not constitute vested rights. In Webster's Comprehensive Dictionary (International Edition) at page 1397, 'vested' is defined as :- Law held by a tenure subject to no contingency; complete; established by law as a permanent right; vested interest.… 21. The word "vest" is normally used where an immediate fixed right in present .....

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ight" cannot be countenanced against public interest and convenience which are sought to be served by amendment of the law.…… 22. Thus, "vested right" is a right independent of any contingency. Such a right can arise from a contract, statute or by operation of law. A vested right can be taken away only if the law specifically or by necessary implication provide for such a course. 36.6 The word property has not been defined either under the Act or Article 300A of the .....

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inite right of use or disposition which one may lawfully exercise over particular things or subjects is called property. The exclusive right of possessing, enjoying, and disposing of a thing is property in legal parameters. Therefore, the word 'property connotes everything which is subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate or status. Proper .....

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tion, and, according to its legal definition, consists in free use, enjoyment, and disposition by a person of all his acquisitions, without any control or diminution, save only by the laws of the land. In Dwarkadas Srinivas case, this Court gave extended meaning to the word property. Mines, minerals and quarries are property attracting Article 300A. Jilubhai Nanbhai Khachar and others v. State of Gujarat and another 1995 Supp (1) SCC 596. 36.8 Property is a term of the widest import and subject .....

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ght to property of which he is being deprived. A demand for tax under an invalid law would amount to deprivation of property. Coffee Board Bangalore v. Joint Commercial Tax Officer AIR 1971 SC 870. 36.10 The Apex Court relying on the Constitution Bench decision in Deoki Nandan Prasad v. State of Bihar and others, AIR 1971 SC 1409 held that the benefit of pension which accrued to an employee is in the nature of property which cannot be taken away without the due process of law as per the provisio .....

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tertainment Network (India) Ltd. v. Super Cassette Industries Ltd. (2008) 13 SCC 30. 36.13 The right to property under Article 300A of the Constitution of India is not a fundamental right but it is a Constitutional right. The Legislature can deprive a person of his property only by authority of law. The Constitution Bench of the Apex Court in K. T. Plantation (P) Ltd. v. State of Karnataka (2011) 9 SCC 1, has held in paragraph 168 that Article 300A proclaims that no person can be deprived of his .....

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to what extent a persons rights will be protected when they are sought to be illegally deprived of their properties on the strength of a legislation. Accrued right or a vested right is a mature right which is capable of enforcement in law. Deprivation of property within the meaning of Article 300A, must take place for public purpose or public interest. Any law, which deprives a person of his property has to be justified upon the purpose and object of the statute and the policy of legislation ot .....

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ct with the Government they were enjoying seven years tax holiday on multiple undertakings in the block. They were entitled to 100% exemption on their profits and gains under the Act. They acquired a vested right on their 100% exemption on their profits and gains which was the property of the Petitioners. By the Amendment in the Act they are being deprived of vested right of property by amending the Act retrospectively. In our opinion, the right given to the Petitioner for enjoying seven years t .....

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the Parliament intended to destroy a right, privilege or benefit enjoyed by the Petitioner under the unamended Section 80-IB(9) of the Act, without authority of a valid law. 36.17 In J. S. Yadav (supra), the Apex Court had held that "vested right" is a right which can arise from a contract, statute or by operation of law. A vested right can be taken away only if the law specifically or by necessary implication provide for such a course. Thus, the State cannot deprive any person, any c .....

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ution of India. Whether the explanation provide for a fresh levy of tax? In other words, did the Legislature in introducing the impugned explanation materially changed the exemption which existed till such explanation was introduced? If the effect of the explanation is to withdraw the existing deductions retrospectively, the question of the same being unreasonable or arbitrary and offending Article 14 would arise. Article 14 of the Constitution of India is reproduced as under:- Article 14. Equal .....

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itted breach of Article 14 or any other Constitutional provision which may render the Amendment Act ultra vires to Article 14 of the Constitution of India. 37.2 The power and competence of the Parliament to amend any statutory provision with retrospective effect cannot be doubted. Any retrospective amendment to be valid must however be reasonable and not arbitrary and must not be violative of any of the fundamental rights guaranteed under the Constitution. The mere fact that any statutory provis .....

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ire as to how the retrospective effect of the amendment operates. 37.3 Article 14 is part of the basic structure of the Constitution and, therefore, cannot be abrogated. The Apex Court in State of A. P. and others. v. Mcdowell & Co. and others (1996) 3 SCC 709, observed that a law made by the Parliament or the Legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in .....

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e Court are empowered to declare the law arbitrary and violative of Article 14 of the Constitution. Further, from the scrutiny of the law made by the Parliament or legislature, if the Court finds that the law which is under challenge as ultra vires infringes the rights or interests of the Petitioner, the Court can strike down the enactment. 37.5 Where there is challenge to the constitutional validity of a law enacted by the legislature, the Court must keep in view that there is always a presumpt .....

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4 in relation to invalidation of legislation. The two dimensions of Article 14 in its application to legislation and rendering legislation invalid are now well recognized and these are (i) discrimination, based on an impermissible or invalid classification and (ii) excessive delegation of powers; conferment of uncanalised and unguided powers on the executive, whether in the form of delegated legislation or by way of conferment of authority to pass administrative orders - if such conferment is wi .....

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v. Director, Central Bureau of Investigation and another (2014) 8 SCC 682 after considering catena of decisions on Article 14 has held in paragraphs 38 to 48 as under :- 38. …The first part of Article 14, which was adopted from the Irish Constitution, is a declaration of equality of the civil rights of all persons within the territories of India. It enshrines a basic principle of republicanism. The second part, which is a corollary of the first and is based on the last clause of the firs .....

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this Court from time to time. The plethora of cases dealing with Article 14 has culled out principles applicable to aspects which commonly arise under this Article. Among those, may be mentioned, the decisions of this Court in Chiranjit Lal Chowdhuri, F.N. Balsara, Anwar Ali Sarkar, Kathi Raning Rawat, Lachmandas Kewalram Ahuja, Syed Qasim Razvi, Habeeb Mohamed, Kedar Nath Bajoria and innovated to even associate the members of this Court to contribute their V.M. Syed Mohammad & Company. The .....

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intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases; namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideratio .....

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and not applicable to others, that single individual may be treated as a class by himself; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that .....

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hile good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discrimina .....

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n of its validity under Article 14 of the Constitution may be placed in one or other of the following five classes : (AIR pp. 548- 49, para 12) 12. … (i) A statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from the surrounding circumstances known to or brought to the notice of the court. In determining the validity or otherwise .....

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e court finds that the classification satisfies the tests, the court will uphold the validity of the law. (ii) A statute may direct its provisions against one individual person or thing or to several individual persons or things but no reasonable basis of classification may appear on the face of it or be deducible from the surrounding circumstances, or matters of common knowledge. In such a case the court will strike down the law as an instance of naked discrimination. … (iii) A statute m .....

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t will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny the court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontro .....

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s or things to whom its provisions are to apply but may at the same time lay down a policy or principle for the guidance of the exercise of discretion by the Government in the matter of such selection or classification. … (v) A statute may not make a classification of the persons or things to whom their provisions are intended to apply and leave it to the discretion of the Government to select or classify the persons or things for applying those provisions according to the policy or the p .....

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14 of the Constitution. It noted that : (SCC p. 506, para 26) 26. … the State can make a reasonable classification for the purpose of legislation and that the classification in order to be reasonable must satisfy two tests: (i) the classification must be founded on intelligible differentia and (ii) the differentia must have a rational relation with the object sought to be achieved by the legislation in question. The Court emphasized that in this regard object itself should be lawful and .....

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of the question whether the Special Courts Bill or any of its provisions, if enacted would be constitutionally invalid. The seven Judge Constitution Bench dealt with the scope of Article 14 of the Constitution. Noticing the earlier decisions of this Court in Budhan Choudhry, Ram Krishna Dalmia, C.I. Emden, Kangsari Haldar, Jyoti Pershad and Shri Ambica Mills Ltd., in the majority judgment the then Chief Justice Y.V. Chandrachud, inter alia, exposited the following propositions relating to Artic .....

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ual protection of its laws sets a goal not attainable by the invention and application of a precise formula. Therefore, classification need not be constituted by an exact or scientific exclusion or inclusion of persons or things. The courts should not insist on delusive exactness or apply doctrinaire tests for determining the validity of classification in any given case. Classification is justified if it is not palpably arbitrary. (4) The principle underlying the guarantee of Article 14 is not t .....

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e legislation their position is substantially the same. (5) By the process of classification, the State has the power of determining who should be regarded as a class for purposes of legislation and in relation to a law enacted on a particular subject. This power, no doubt, in some degree is likely to produce some inequality; but if a law deals with the liberties of a number of well- defined classes, it is not open to the charge of denial of equal protection on the ground that it has no applicat .....

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l or evasive. (7) The classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differenti .....

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number of other persons similarly situated in relation to the privileges sought to be conferred or the liabilities proposed to be imposed, it does not forbid classification for the purpose of legislation, provided such classification is not arbitrary in the sense above mentioned. (9) If the legislative policy is clear and definite and as an effective method of carrying out that policy a discretion is vested by the statute upon a body of administrators or officers to make selective application o .....

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g against the equal protection clause. On the other hand, if the statute itself does not disclose a definite policy or objective and it confers authority on another to make selection at its pleasure, the statute would be held on the face of it to be discriminatory, irrespective of the way in which it is applied. (10) Whether a law conferring discretionary powers on an administrative authority is constitutionally valid or not should not be determined on the assumption that such authority will act .....

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fferent from those resting upon the general public. Indeed, the very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. (12) Whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory and violative of Article 14 must be determined in each case as it arises, for, no general rule applicable to all cases can safely be laid down. .....

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nstitutional validity of Regulation 46(i)(c) of Air India Employees Service Regulations (referred to as the A.I. Regulations ) held that certain conditions mentioned in the Regulations may not be violative of Article 14 on the ground of discrimination but if it is proved that the conditions laid down are entirely unreasonable and absolutely arbitrary, then the provisions will have to be struck down. With regard to due process clause in the American Constitution and Article 14 of our Constitution .....

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nt and meaning of Article 14. The Court referred to earlier decisions of this Court and in para 15, the Court observed: (SCC pp.317-18) 15. Thus the fundamental principle is that Article 14 forbids class legislation but permits reasonable classification for the purpose of legislation which classification must satisfy the twin tests of classification being founded on an intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of the gro .....

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of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14, and if it affects any matter relating to public employment, it is also violative of Article 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment. 37.7. The Apex Court in Shimnit Utsch India Pv .....

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nesbury reasonableness and free from arbitrariness, irrationality, bias and malice. 37.8 In a democratic set up, it is for the legislature to decide what economic or social policy it should pursue or what administrative consideration it should bear in mind. It is well recognized that Parliament or the legislature has to be granted greater latitude in framing a taxing statute. The primary purpose of the levy of all taxes is to raise funds for public good. Which person should be taxed, what transa .....

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withdrawn with retrospective effect, surely there would be a case of providing for a tax which was till then not known. 37.9 When a tax law or amendment made therein is impugned under Article 14, the Court is to decide whether the amendment in tax law is palpably so arbitrary or unreasonable that it must be struck down. The word arbitrary is used in the sense of being discriminatory. An act which is discriminatory is liable to be labeled as arbitrary. 37.10 If from a bare reading of the provisio .....

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de. We may call it liberalization, privatization and globalization policy to ensure that India is in the process of restructuring her economy, with expressions of elevating and speeding up her economic development, in which the foreign direct investment is playing a major role in rapid economic growth and we are on the fast track to prosperity. For successful working of the democracy and national economy, it is essential that the public revenue be generated. 39. In Reliance Natural Resources Ltd .....

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people of India. Thus, it is the solemn duty of the State to protect the national interest. 39.1 The Constitution envisages exploration, extraction and supply of mineral oil and gas to be within the domain of governmental functions. It is the duty of the Union to make sure that these resources are used for the benefit of the citizens of this country. Due to shortage of funds and technical know-how, the Government has privatized such activities through the mechanism provided under the Production .....

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1961 do not explicitly or impliedly forbid as to how a company and the Government should enter into agreements or contracts. In absence of contract, there is no vested interest which requires the continuance of a legislative policy however expressed in a system of taxation. A vested right is a legal and enforceable right, enforceable by a legal process. 42. Liberal tax incentives for undertaking specific activities such a exploration of mineral oil and gases could be granted by the Government. T .....

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of law. 43. The Government invited foreign company to India including domestic companies by issuing global tender by opening up foreign direct investment, in the field of exploration of mineral oil and gases, under the PSC, where the Petitioner was to carry on the exploration, development and production of mineral oil and natural gas. The Petitioner is subject to Income Tax law in India. He has been awarded the right to explore, develop and produce mineral oil in various blocks. For this purpos .....

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s and gains from the production of mineral oil and natural gas under Section 80-IB(9) as it stood prior to an amendment to Section 80-IB(9) of the Act, which was introduced by the Finance (No.2) Act, 2009. In these proceedings, the constitutional validity of the amendment to sub-Section (9) of Section 80-IB of the Act by the Finance (No.2) Act, 2009, has been challenged. 44. After the foreign investors entered India and apart from other sectors, they also participated in exploration, discovery a .....

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uction for a period of seven years on each well/cluster of wells which is an undertaking and qualifies for tax deduction. The amendment in Section 80-IB(9) and addition of Explanation was made by the legislature by Finance (No.2) Act, 2009 which was given retrospective operation with effect from 1.4.2000, after the Petitioner had started commercial production and were entitled for 100% tax deduction on profits and gains. 45. The ownership of natural resources embedded in the sea bed and ground v .....

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of entering into a PSC with the successful bidders who is nomenclature as the contractor under the PSC. 46. Notice Inviting Offers under the NELP, where under the heading "Main Features of the Terms Offered", it was stated that "Income Tax Holiday for seven years from the start of commercial production" will be available and further that "To facilitate investors, a Petroleum Tax Guide (PTG) is in place". A gas basin comprises of a huge area and each basin may compr .....

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contractor was to drill. For this purpose, a separate development plan for development of each field is prepared by the contractor and is approved by a body known as the Management Committee in which the Government has the veto power. Each of such wells/cluster of wells is a separate and independent undertaking. Moreover, the notice inviting offers and the PSC envisage an exploration period, followed by development and production period. The exploration period is a maximum of seven years. While .....

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areas of the block were still under exploration or development stage as stipulated in the PSC. The term undertaking, therefore, cannot be construed to mean the entire block to reckon the period of seven years of the tax holiday. 47. 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 a .....

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the field, Development Plans consisting of either a single well/cluster of wells had been approved. Thus, the Central Government has always been aware that there are more than one undertaking in each Block, has acted on this premise in approving more than one Commercial Discovery in each Development Area of a Block and cannot now introduce by retrospective amendment, the concept that an entire Block would be a single undertaking, and that such an amendment is liable to be struck down as unreaso .....

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nt years, including the initial assessment year if such undertaking fulfills any of the following namely,...is located in any part of India and has begun or begins commercial production of mineral all on or after 1st day of April 1997". 49.1 Three conditions need to be satisfied cumulatively to derive benefit under Section 80-IB(9). Firstly, the undertaking should be located in any part of India. Secondly, it has begun or begins commercial production of mineral oil and thirdly on or after 1 .....

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" have been defined under Section 80-IB of the Act. The Apex Court had defined and laid down the test as to what would constitute an "undertaking" in the case of Textile Machinery Corporation Ltd. (supra). This was the case relating a claim by the assessee under Section 15C of the Income Tax Act, 1922 and vide paragraph 2, two questions were referred before the High Court as follows:- (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding .....

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xisting manufacturing process to aid the production of the same article as was been produced by the pre-existing industrial undertaking would not amount to starting of new industrial undertaking. It was contended that the production of articles in the steel foundry and in the jute mill division is only ancillary activity to the main business of the assessee and since the articles produced in these two supplemental undertakings help in producing identical articles which has been the end product o .....

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fit since every new creation in business is some kind of expansion or advancement. The true test is not whether a new industrial undertaking connotes expansion of the existing business of the assessee, but whether it is a new and identifiable undertaking separate and distinct from the existing business. The new undertaking must exist on its own as a viable unit. A new undertaking can exist even after cessation of the principal business of the assessee and vice versa. It does not matter whether t .....

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t would constitute a new undertaking. Maintenance of separate books of accounts and discernible profits would also aid the conclusion. 49.6 In short, an undertaking is one which on a standalone basis is an economically independent unit. As long as this test is satisfied, it is immaterial whether the undertaking carries out the same business or different business. Economically independent units doing the same business would constitute separate undertakings. 49.7 Applying the above law laid down b .....

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king and it can even carry on the same business or distinct business. The test is, the undertaking economically independent and commercially carrying out the activities as a self sustainable unit. 49.9 PSC is a sovereign contract entered into on behalf of the President of India under Article 299 of the Constitution of India. The Petitioner in paragraph 13 of the affidavit has brought on record the methodology for development of oil and gas fields. A perusal of the same indicates that there are d .....

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s and services or incidental to the recovery, storage and transportation of mineral oil from the proposed Development Area. Thereafter, on the basis of the approved plan, either one or multiple wells are drilled for exploiting the reservoir. It is pertinent to note that there is a Development Plan approved by the Management Committee for every Development Area/Field. 49.10 We now refer to the PSC dated 17th July 2001 entered into between the Petitioner and the Government of India. Commercial Pro .....

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ct Area (excluding production for testing purposes) and delivery of the same at the relevant delivery point under a programme of regular production and sale. 49.11 Contract Area is the whole area under the PSC. A Commercial Discovery when made from any part of the Contract Area would qualify to become a Development Area. Article 1.31 of the PSC defines Development Area means "part of the Contract Area which encompasses one or more Commercial Discoveries and any additional area that may be r .....

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own to have existed which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods. Article 1.38 defines Discovery Area means that part of the Contract Area about which based on Discovery under results obtained from a well or wells drilled in such part, the Contractor is of the opinion that petroleum exists and is likely to be produced in commercial quantities. 49.13 Article 1.51 defines Gas Field means within the Contract Area, a natural gas reserv .....

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i) There can be more than one Discovery within the Contract Area, (ii) There can be more than one Discovery Area within the Contract Area which as defined will include a well or wells drilled in such part of the Area. (iii) There can be more than one Commercial Discovery within the Contract Area. (iv) Every Area in which there is a Commercial Discovery which has one or more reservoir is called as Oil or Gas fields or in other words Development Area. (v) There can be more than one Development Are .....

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, work programme, budget and expenditure is separately identified for each such Development Area. Revenue streams are identifiable from mineral oil produced from each of the Development Area/Field. 49.16 Therefore, it is clear that Commercial Production in terms of Section 80-IB(9)(ii) would arise when a Contractor proceeds to commercially produce mineral oil from each and every Development Area/Field with standalone, independent, identified investment, costs, budgets and revenues. The activitie .....

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n on an independent standalone basis. 49.17 The Explanation inserted by the Finance (No.2) Act 2009 in 80-IB(9) is reproduced below:- "Explanation.- For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licensing Policy announced by the Government of India vide Resolution No.O-19018/22/95-ONG. DO. VL dated 10th February, 1999 or has been awarded in pursuance of any law for the time being i .....

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"single" in the Explanation would automatically give rise to the legal inference of existence of multiple undertakings for the same assessee within the same Contract Area or Block. The Explanation proceeds to deem multiple undertakings as a single undertaking with reference to the Block licensed. This is the plain and simple meaning and interpretation one can extend to the Explanation. 49.18 Section 80-IB(9)(ii) before the insertion of the Explanation had created a substantive vested .....

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taking" has not been defined under the Act, it has acquired a well defined meaning through consistent judicial decisions commencing from Textile Machinery case. The expression 'Undertaking' is used in various provisions of the Act, while conferring the benefits under different schemes. It is clear that commercial production of mineral oil happens from every Development Area/Field consisting of a well or cluster of wells with a Development Plan being approved for every Development Ar .....

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ing" has acquired a consistent statutory meaning. It is true that legislature is entitled to depart from this meaning and can define it the way it chooses to do so. While doing so, it has to resort to the process known to and approved by law. The explanation introduced by Finance Act (No.2) of 2009 is a departure from the settled interpretative meaning given by Courts to the expression 'Undertaking". Any departure, therefore, has to be through the process of validation which has to .....

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e same or distinct business as long as they are independent stand alone units. When, clearly there can be separate commercial discoveries for every Development Area/Field which may consists of one well or cluster of wells which makes each Development Area an "Undertaking" and this is as per the Production Sharing Contract (PSC) entered into between the Petitioner and the Central Government, there does not exist any ambiguity under the Act. 49.21 There is no ambiguity or doubt which nee .....

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what was the provision earlier. For gathering the legislative intent to give retrospectively to the Explanation added by amendment to Section 80-IB(9) its apposite to find out the reasons and whether they are reasonable and for this purpose, it will be necessary to take into account the history of legislation or the averment introduces a tax which is substantive in nature under the garb of adding a definition which is clarificatory, declaratory, curative or makes small repair in the Act. 50.1 In .....

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er would have been relevant for the purpose of opining as to whether the court independently would have arrived at a conclusion that organizing lottery would amount to rendition of service but not otherwise. 37. As it is not possible for us to arrive at the said conclusion, we have no other option but to hold that by inserting the explanation appended to clause (19) of Section 65 of the Act, a new concept of imposition of tax has been brought in. The Parliament may be entitled to do so. It would .....

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. Commissioner of Income-tax, Ernakulam and another [(1981) 4 SCC 173 at 184], in the following terms:- "8. … Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpos .....

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(1985) 4 SCC 608] 39. It is, however, also well settled that the statute must be interpreted keeping in view the words used in it. We must notice that in Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi-I [(2007) 9 SCC 665], a Bench of this Court has held:- "24. Section 271 of the Act is a penal provision and there are well-established principles for the interpretation of such a penal provision. Such a provision has to be construed strictly and narrowly and not widely or with .....

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ication issued by the Parliament was in tune with the actual interpretation of the original provision. 50. It is, therefore, evident that by reason of an explanation, a substantive law may also be introduced. If a substantive law is introduced, it will have no retrospective effect. The notice issued to the assessee by the appellant has, thus, rightly been held to be liable to be set aside. 51. Subject to the constitutionality of the Act, in view of the explanation appended to this [sic Section 6 .....

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at organizing games of chance would be rendition of service. We are herein not concerned as to whether it was constitutionally permissible for the Parliament to do so as we are not called upon to determine the said question but for our purpose, it would be suffice to hold that the explanation is not clarificatory or declaratory in nature. 50.3 The briefly set out the history of the Government's policy and the tax holidays in regard to production of mineral oil in the country. (i) Prior to 19 .....

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troduced by Finance Act 1998 in Section 80-IA of the Income Tax Act, 1961. (iii) The Government, in order to attract private investments in the mineral oil sector, formulated the New Exploration and Licensing Policy (NELP) which came to be notified in the official gazette on 10th February, 1999. Among other things, the NELP stated that a seven years tax holiday from the date of commencement of commercial production would be available to the contractors under NELP. The NELP also stated that a sep .....

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tment has taken a view; the assessees have taken another view. The disputes go back to assessment year 2001-02. The disputes are under adjudication before different tax authorities. In my view, it is not correct to resolve these disputes by debate in Parliament We should allow the disputes to be resolved in the normal course by the tax tribunals and the courts. Nevertheless, some doubts have arisen because of the notes on clauses attached to the Finance Bill. I wish to clarify these doubts. The .....

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n blocks that the benefit of Section 80IB(9), as finally interpreted by the courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding..." 50.5 The Finance Minister on the floor of the Parliament while moving the motion for the consideration of Finance Bill 2008 stated that the sub-section allows 100 per cent tax exemption in respect of an undertaking which begins commercial production or refining of mineral oil for a period of sev .....

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entitled to 100% tax deduction on profits and gains the law was amended by the Parliament with retrospective effect, though the Revenue had challenged the judgment of ITAT before High Court in appeals which are still pending. Budget speech of the Finance Minister while introducing Finance (No.2) Bill, 2009:- "102. Madam Speaker, in the context of the geo-political environment, it is necessary for us to create our own faculties for energy security. Accordingly, I propose to extend the tax ho .....

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ions of the said section to provide that "undertaking" for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract." 50.7 The legislative intent is clearly reflected in the action of the legislature in adding Explanation to Section 80-IB(9) by Finance (No.2) Act, 2009 by way of amendment with retrospective effect. It is easily discernible, that the legislature wanted to overcome the decision of the Income Tax Appellate Tribunal wherein it had been held .....

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titution, empowering the legislature to make laws for levy of taxes, including the income-tax. The rationale behind collection of taxes is that revenue generated therefrom shall be spent by the governments on various developmental and welfare schemes, among others. Explanation to Section 80-IB(9) by Finance (No.2) Act, 2009 by way of amendment with retrospective effect is clarificatory, declaratory, curative or makes small repair or a substantive provision 51. The Constitutional Bench of the Ape .....

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ion appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the exi .....

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h of the then existing law. 51.1 We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it .....

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n the case of Vijay v. State of Maharashtra and others (2006) 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are not confronted with any such situation here. 51.2 In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity .....

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the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. 51.3 Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labeled as declaratory statutes . The circumstances under which a provision can be termed as declaratory statutes is expl .....

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usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word 'enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be us .....

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l settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language 'shall be deemed always to have meant' is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the princip .....

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nature of amendment to Section 29 (2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows :- The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from s. 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain th .....

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11. Now it is a well settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in sev .....

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which is fairly capable of either interpretation, it ought to be construed as prospective only. 51.6 In the case of C.I.T., Bombay v. Scindia Steam Navigation Co. Ltd. [1962 (1) SCR 788], this Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospect .....

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ished principle of statutory interpretation, to help finding out as to whether particular category of assessee are to pay a particular tax or not. No doubt, with the application of this principle, Courts make endeavour to find out the intention of the legislature. At the same time, this very principle is based on fairness doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, t .....

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lings v. U.S.[232 U.S. 261, at p.265, 34 S.Ct. 421 (1914)], the Supreme Court clearly acknowledged this basic and long- standing rule of statutory construction: Tax Statutes . . . should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favor of the citizen. Eidman v. Martinez, 184 U.S. 578, 583; United States v. Wigglesworth, 2 Story, 369, 374; Mutual Benefit Life Ins. Co. v. Herold, 198 F. 199, 201, affd 201 F. 918; Parkview Bldg. Assn. v. Herold, 203 F. 87 .....

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be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151, 153 51.10 As Lord Cairns said many years ago in Partington v. Attorney- General [(1869) LR 4 HL 100]: As I understand the principle of all fiscal legislation it is this : If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may a .....

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amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of the legislature. It can be seen from the same notes that few other amendments in the Act were made by the same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend S.92F. Clause iii (a) of S.92F is amended so as to clarify that the activities mentioned in the said clause include the carrying out of any work in pursuance of a contract. This a .....

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of and took note of the reasons which led to the insertion of the proviso that the amendment is to operate prospectively. Learned counsel appearing for the assessees sagaciously contrasted the aforesaid stipulation while effecting amendment in Section 113 of the Act, with various other provisions not only in the same Finance Act but Finance Acts pertaining to other years where the legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment .....

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rom 1.6.2002. 52. The Apex Court in Commissioner of Income Tax-I, Ahmedabad v. Gold Coin Health Food Pvt. Ltd. (2008) 9 SCC 622, in paragraph 6 held that penalty provision were already in existence and penalty was not imposed for the first time. The amendment by the Finance Act as specifically noted in the Notes on Clauses makes the position clear that the amendment was clarificatory in nature and would apply to all assessments even prior to assessment year 2003-04. The Apex Court further held i .....

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ent to the amendment to determine whether amendment is clarificatory or substantive. The Apex Court in paragraph 20 relied on the decision in Zile Singh v. State of Haryana and others (2004) 8 SCC 1 with approval that it is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to .....

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ed in India and bring about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively. 36. It is, therefore, evident that by reason of an explanation, a substantive law may also be introduced. If a substantive law is introduced, it will have no retrospective effect. 54. The Petitioner has been claiming a well or a cluster of .....

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he legislative intent as the seven years tax holiday was provided by inviting public private participation contract as huge expenditure was involved in exploration, discovery and commercial production of mineral oil. The benefit of 100% deduction on profits and gains was granted by the legislature under the Act to invite investment and encourage mineral oil exploration, discovery and commercial production. The legislature gave a clear message to foreign and domestic investors that the State is e .....

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Section 80- IB(9) by adding an Explanation that provides that all blocks licensed under a single contract shall be treated as a single undertaking. The PSC provides a period of four years for exploration of mineral oil etc. The argument of learned counsel for the respondent is that the moment the first well starts commercial production of mineral oil, the clock of seven year tax holiday starts ticking and even if the other wells may have been explored or discovered or started commercial producti .....

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exploration, discovery and commercial production has to be commenced by the Petitioner within a period of four years. If he discovers a well, wherein commercial production can be commenced within a period of three months or six months from the date he started exploration, then whether he should wait and continue to make investment on exploration and discovery of mineral oil in the entire stretch of 200 square Kms., and start commercial production of all the wells together so that all the well/c .....

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of considerable dispute. The assessees who are claiming every well in a block licensed constitutes a single undertaking entitled for tax holiday separately for each well. According to the Finance Minister, the view taken by the assessee were against the legislative intent. What was the legislative intent when 100% tax deduction on profits and gains was granted by the legislature was neither stated nor explained by the Finance Minister. The expression legislative intent was used by the Finance Mi .....

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tive intent while presenting the Finance Bill 2008 in the Parliament. The legislative intent is clear from the speech of the Finance Minister on the floor of the Parliament while moving the motion for the consideration of Finance Bill 2008, he clearly stated that sub-section allows 100 per cent tax exemption in respect of an undertaking which begins commercial production or refining of mineral oil for a period of seven consecutive assessment years ……….In my view, it is not c .....

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f ITAT was against the revenue as the ITAT had found that each well/cluster of wells was a separate undertaking entitled to seven years tax holiday. The Revenue had challenged the decision of the ITAT before the High Court and thereafter, they have a remedy before the Apex Court. But, arbitrarily, the 100% tax deduction benefit could not be withdrawn by the Finance Minister or the legislature by amending Section 80-IB(9) of the Act retrospectively from an anterior date. The amendment in such cas .....

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cted to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. (See Controller of Estate Duty Gujarat-I v. M.A. Merchant [1989 Supp (1) SCC 499]. 61. The Apex Court in Gold Coin Health Food Pvt. Ltd. (supra), held in paragraph 8 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 .....

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e 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 .....

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