TMI Blog2015 (3) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... wordings in the Statute, to draw a conclusion that only undertakings engaged in the commercial production of 'mineral oil other than natural gas will be entitled to deductions of profits and gains under the above mentioned sub-section, is wholly incorrect. For the aforesaid reasons, we hold that the insertion of sub clause (iv) to Section 80-IB(9) of the Act by the Finance (No.2) Act, 2009 cannot be interpreted to mean that the term mineral oil as used in Section 80-IB does not include natural gas and cannot result in denial of the benefit of deduction under Section 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to VIIIth round of bidding. In view of the decision of the Constitutional Bench of the Apex Court, the term mineral oil includes and has always included natural gas . The benefits of deductions under Section 80-IA were expressly made available with effect from 1.4.1999 by amending the then existing Section 80-IA. Later on Section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an undertaking . Neither Section 80-IA, Section 80-IB nor the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s substantive law and could not apply retrospectively. The Explanation added to Section 80-IB(9) breaches the rule of law and is arbitrary being violative of Article 14 of the Constitution of India is struck down. In the result, both the writ petitions succeed and are allowed. The Explanation to Section 80-IB(9) of the Act is held to be ultra vires to Article 14 of the Constitution of India. Rule is made absolute. - Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 13134 of 2009 With SPECIAL CIVIL APPLICATION 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 Petitioner is subject to income tax in India in accordance with the provisions of the Income Tax laws in India. The Petitioner is engaged in exploration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, figures and letters the 1st day of October, 1998 , the words, figures and letters but not later than the 31st day of March, 2012 shall be inserted; (B) after clause (iii), the following clause shall be inserted with effect from the 1st day of April, 2010, namely:- '(iv) is engaged in commercial production of natural gas in blocks licensed under the VIII 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.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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of this Section , be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-Section (5) and for such number of assessment years as is specified in sub-Section (6). (4E) : This Section applies to any undertaking which 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 such business for the initial seven assessment years. 10. By an amendment in Finance Act, 2001, when the benefit to commercial producers of mineral oil was shifted from Section 80-IA to Section 80-IB and the said Section 80-IB with effect from 1.4.2002, till its amendment by Finance Act, 2008 reads as under :- 80-IB(1) Where the gross total income of an assessee includes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Memorandum to the Finance (No.2) Bill, 2009, by which the above amendments were introduced reads as under :- The term undertaking in sub-Section (9) has not been defined. Therefore, in the context of mineral oil, the meaning of the term undertaking has been the subject matter of considerable dispute. The tax payers have been holding the view that every well in a block licensed constitutes a single undertaking and accordingly the tax holiday is available separately 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 of any law for the time being in force or has been awarded by Central or a State Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral 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 production would be available to the contractors under NELP. The NELP also stated that a separate Petroleum Tax Guide would be in place to facilitate the investors. 18. This Petroleum Tax Guide is a compilation of the laws relating to Income Tax, Custom Duties, Central Excise and other laws, as applicable to activities connected with prospecting for or extraction and production of petroleum in the upstream sector under PSC entered into on or after 1st January 1999. The tax guide also provides that in event 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 paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to be considered to determine the entitlement of the benefit under this Section. On appeal by the Petitioner, the Income Tax Appellate Tribunal (hereinafter referred to as 'ITAT'), by its order dated 29th February 2008, held that each well/cluster of wells constituted a separate undertaking and therefore the Petitioner was entitled to a deduction 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 Explanation to Section 80-IB(9) by the Finance (No.2) Act, 2009, defining the term undertaking to mean all blocks licensed under single contract with retrospective effect from 1.4.2000, by an Order dated 7th September 2009, the claim of the Petitioner for the Assessment Year 2006-07 under Section 80-IB(9) was disallowed by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 for 7 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 comprise of a number of blocks with delineated areas. Each block may have one or more gas or oil fields where hydrocarbons had been discovered. Every field may have one or more wells, depending on the extent of the mineral oil reserve driven by technical requirements. Once a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire Block, the Development Area is a part of the Contract Area 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 Development Operations and Development Plan were stressed to point out that there is a separate plan approved by the Management Committee for development of a Commercial Discovery for a Development Area or a Field. It was pointed out that there can be more than one Development Plan for development of a Block and every Development Area or Field which may consist of one well/cluster of wells is a separate and independent undertaking, as this term has been understood both by the Contractor and the Government. Several other definitions such as Discovery , Discovery Area , Exploration Operations , Exploration Period , Exploration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 25.9 The Gujarat High Court in Gujarat Alkalies and Chemicals Ltd v. Commissioner of Income Tax 350 ITR 94 (Guj) held that a new unit, even if it derived help from an existing unit and is dependent on the existing undertaking, will not deprive the new undertaking the status of a separate and distinct identity. 25.10 The learned Senior Counsel contended 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 that a well/cluster of wells is an undertaking . He contended that the amendment, retrospectively, deprives persons similarly placed as the Petitioners of their legitimate vested rights. An amendment such as this can never be considered clarificatory but is in the nature of an unreasonable substantive retrospective amendment and is liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85. 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 Petitioner and subject the Petitioner to financial liabilities which did not exist at the relevant time retrospectively in an arbitrary and unreasonable manner by an amendment which was of a substantive nature. 25.12 It was further contended by the learned Senior counsel that the benefits of deductions under Section 80-IA were expressly made available with effect from 1.4.1999 by amending the then existing Section 80-IA. Later on Section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an undertaking . Neither Section 80-IA, Section 80-IB nor the provisions of PSC provided that the undertaking would be construed as a whole Block. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that the companies shall be eligible for benefit under Section 80-IA of the Act, as applicable from time to time. This clearly 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 revisions and adjustments to the Contract in order to maintain the expected economic benefit to such affected parties. There, however, has never been any vested right, as is being claimed by the Petitioner. These are no rights vested by a statute. At the best, these can be considered to be contractual rights under a Contract with the Government which can be taken away, modified or withdrawn. Even assuming that such rights are vested in the Petitioner, these rights have not been available and/or have not arisen as yet. The Respondents have not admitted these rights at an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner with regard to unreasonableness cannot be sustained under Article 14. 27. The learned Senior Counsel for the Respondent further contended as follows:- (i) There are established principles while considering the constitutional validity of a statute said to be violative of Article 14. There is presumption in favour of the constitutionality of the statute. The burden is upon the person who impugnes the provisions to show that there has been a transgression. Law relating to economic activities 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 (2006) 1 SCC 597. (iv) When the assessments have not become final, no right can be said to be vested. Escorts Limited and another v. Union of India (1993) 1 SCC 249. (v) Clarificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 contractual vested right cannot be the reason to strike down an amendment to law. 28. On the second issue involved in the petition is whether the term mineral oil includes natural gas , the contention of Mr. S. N. Soparkar, learned Senior Counsel for the Petitioner is that this amendment has the effect of erroneously considering that the term mineral oil does not include natural gas prior to this amendment. This amendment is unreasonable and in any event not in consonance with industry 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this Section to undertakings engaged in commercial production of natural gas in blocks licensed under VIIIth round of bidding provided such commercial production commenced on or after 1.4.2009 results in denial of the benefit of deduction under 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts 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 deal with the second issue first. 33. Before we go into the issue of constitutional validity and vires of the amendments by insertion of sub-clause (iv) to Section 80-IB(9) to the Act, it will be profitable to understand the meaning and import of the expression mineral oil . The term mineral oil has not been defined under the Act. The Respondent seeks to rely on Explanation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 petroleum products, and therefore State has the legislative competence to pass legislation in respect of natural gas, as it is not a petroleum gas. 35.4 The Apex Court framed the following question in paragraph 19 of the decision :- The controversy in the instant case could only be resolved by examining the question whether the expression petroleum and petroleum products , or mineral oil resources mentioned in Entry 53 of List I of the Seventh Schedule would take in its 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 with sedimentary rocks. These sediments were first laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ueezed and distorted as the earth's crust moved. Gradually 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 the earth's surface cracks the cap rock. 31. 'Natural gas' has been defined in the Webster's new 20th Century dictionary, unabridged second edition, as follows : Natural Gas: A mixture of gaseous hydrocarbons, chiefly methane, occurring naturally in the earth in certain place, from which it is piped to cities etc, to be used as a fuel. (p-756). 32. In Ballantine's Law Dictionary, 3rd Edn. 1969, 'Natural Gas' has been defined as A mineral 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 ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriate. Liquid Fuel Emergency Act, 1984 (Sec.3) petroleum means :- (a) any naturally occurring hydrocarbon or mixture of hydrocarbons, whether in a gaseous, liquid or solid state; or (b) any naturally occurring mixture of a hydrocarbon or hydrocarbons and of another substance or other substances, whether in a gaseous, liquid or solid state. 40. The various legislations 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 oils (which in turn include natural gas and petroleum). 3. The Mines and Minerals (Development and Regulation) Act, 1957, 3.(b) minerals oils includes natural gas and petroleum. 4. Petroleum and Natural Gas Rules, 1959, 3. (k) Petroleum means naturally occurring hydrocarbons in a free state, whether in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 present in the rocks tends to migrate upwards ; and Liquid and gaseous hydrocarbon 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 , concluded as follows :- (i) 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, either the 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 the Latin term petra-oleum. (petra-means roc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough to encompass 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 reasons:- (I) The judgment of the Apex Court makes it very clear that the expression mineral oil encompasses within itself petroleum products and natural gas. (ii) The Constitutional Bench judgment was delivered on 25.3.2004. The Explanation in Sections 42 and 293A was introduced vide Finance Act 1981 effective from 1.4.1981. Explanation of Section 44BB was again introduced vide Finance Act 1987 with retrospective effect from 1.4.1983. (iii) The judgment of the Apex Court which is later 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compasses natural gas. The proposition that even though the findings of the Apex Court are unequivocal, for the purpose of Section 80-IB the term mineral oil would not encompass within its purview, natural gas only has to be stated to be rejected. 35.13 The judgment of the Apex Court holds the field. The ratio of this judgment remains unaffected by the subsequent amendments to Section 80-IB(9)(ii). 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 Regulation) Act 1957, Petroleum and Natural Gases Rules 1959, The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act 1962 and The Oil Industry Development Act 1974 have been passed by the Parliament. Since there was no explicit entry Natural Gas in Entry 53, all the aforesaid le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 begins refining not later than the 31st day of March, 2012. 35.15 Statement of the Finance Minister on the floor of the Parliament while moving the motion for the consideration of Finance Bill 2008 :- ...Members are aware, this 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. Now, what is the scope of this Section? It is disputed. The Department 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears, including the initial assessment year, if such undertaking fulfills any of the following :- (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 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 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 in any other manner, shall be treated as a single undertaking . This amendment will take effect retrospectively from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years. It is furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Central or a State Government in any other manner, shall be treated as a single undertaking ; (b) In sub-section (9), as so substituted, - (A) in clause (iii), after the words, figures and letters the 1st day of October, 1998 , the words, figures and letters but not later than the 31st day of March, 2012 shall be inserted; (B) after clause (iii), the following clauses shall be inserted with effect from the 1st day 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 natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. We propose to consider Article 300A of the Constitution of India which reads as under :- Article 300A. Persons not to be deprived of property save by authority of law. No person shall be deprived of his property save by authority of law. Two words, person and property in Article 300A are important. We may first consider the meaning of word 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (42) of the General Clauses Act is undoubtedly illustrative and not exhaustive. The well-known rule of interpretation regarding such inclusive definitions has always been to treat the other entities, which would not otherwise have come strictly within the definition, to be a part thereof, because of illustrative enactment of such definitions. The legislature is competent in its wisdom to define person separately 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 the word person so that the general meaning of the word person in its generic sense with its width would not be cut down by the specific qualification of one species, i.e., natural person when it is capable to encompass in its ambit, natural persons, juristic persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Constitution. According to Salmond s Jurisprudence, word property means legal rights of a person of whatever description. 36.7 Property in legal sense means an aggregate of rights which are guaranteed and protected by law. It extends to every species of valuable right and interest, more particularly, ownership and exclusive right to a thing, the right to dispose of the thing in every legal way, to possess it, to use it, and to exclude everyone else from interfering with it. The dominion or indefinite 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purview of Article 300A. State of Kerala v. Padmanabhan AIR 1985 SC 356. 36.12 Copyright is a right to property and the same can be acquired only on payment of compensation. Entertainment 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 property save by authority of law, meaning thereby that a person cannot be deprived of his property merely by an executive fiat, without any specific legal authority or without the support of law made by a competent legislature. The expression `Property' in Article 300A confined not to land alone, it includes intangibles like copyrights and other intellectual property and embraces every possible interest recognized by law. 36.14 Similarly, valid contracts are property. But the question is as to what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion provide for such a course. Thus, the State cannot deprive any person, any corporation or company of his property, without following the rule of law, violating Article 300A of the Constitution of India. Article 14 of the Constitution of India. 37. Now coming back to the first question as to whether the insertion of the Explanation to Section 80-IB(9) of the Act, by Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000 purporting to explain the meaning of the term undertaking is unconstitutional and ultra vires and offends Article 14 of the Constitution 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. Equality before law.-The State shall not deny to any person equality before the law or the equal protection of the laws wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 presumption of constitutionality of an enactment, and a clear transgression of constitutional principles must be shown. The fundamental nature and importance of the legislative process needs to be recognized by the Court and due regard and deference must be accorded to the legislative process. Where the legislation is sought to be challenged as being unconstitutional and violative of Article 14 of the Constitution, the Court must remind itself to the principles relating to the applicability of Article 14 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, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of Article 14 in Budhan Choudhry as follows :- (SCC p. 193, para 5) 5. It is now well-established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an 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 consideration. It is also well-established by the decisions of this Court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure. 41. In Ram Krishna Dalmia, the Constitution Bench of five Judges further culled out the following principles enunciated in the above cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 of such a statute the court has to examine whether such classification is or can be reasonably regarded as based upon some differentia which distinguishes such persons or things grouped together from those left out of the group and whether such differentia has a reasonable relation to the object sought to be achieved by the statute, no matter whether the provisions of the statute are intended to apply only to a particular person or thing or only to a certain class of persons or things. Where the 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutive action but not the statute should be condemned as unconstitutional. 44. In Vithal Rao, the five-Judge Constitution Bench had an occasion to consider the test of reasonableness under Article 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 it cannot be discriminatory. If the object is to discriminate against one section of the minority, the discrimination cannot be justified on the ground that there is a reasonable classification because it has rational relation to the object sought to be achieved. 45. The constitutionality of the Special Courts Bill, 1978 came up for consideration in Special Courts Bill, 1978, In re as the President of India made a reference to this Court under Article 143(1) of the Constitution for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well- defined classes, it is not open to the charge of denial of equal protection on the ground that it has no application to other persons. Classification thus means segregation in classes which have a systematic relation, usually found in common properties and characteristics. It postulates a rational basis and does not mean herding together of certain persons and classes arbitrarily. (6) The law can make and set apart the classes according to the needs and exigencies of the society and as suggested by experience. It can recognise even degree of evil, but the classification should never be arbitrary, artificial 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 differentia which distinguishes those that are grouped together from others and (2) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... class are cast duties and burdens different 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. A practical assessment of the operation of the law in the particular circumstances is necessary. (13) A rule of procedure laid down by law comes as much within the purview of Article 14 as any rule of substantive law and it is necessary that all litigants, who are similarly situated, are able to avail themselves of the same procedural rights for relief and for defence with like protection and without discrimination. 46. In Nergesh Meerza, the three-Judge Bench of this Court while dealing with constitutional validity of Regulation 46(i)(c) of Air India Employees Service Regulations (referred to as the A.I. Regulations ) held that certain condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Infrastructure Development Corporation Ltd., (2010) 6 SCC 303 held in paragraph 52 that the government has a discretion to adopt a different policy or alter or change its policy calculated to serve public interest and make it more effective. Choice in the balancing of the pros and cons relevant to the change in policy lies with the authority. But like any discretion exercisable by the government or public authority, change in policy must be in conformity with Wednesbury 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 transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations. The power of taxation can be used not merely for raising revenue but also to regulate the economy, to encourag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Sharing Contract (PSC). 40. Power to impose tax is essentially a legislative function under Article 265 of the Constitution of India. Article 265 states that no tax shall be levied except by authority of law. In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 41. 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 continuance of a legislative policy however expressed in a system of taxation. A vested right is a legal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der a single contract would be treated as a single undertaking. The effect, it appears is devastating on the investors. They have carried out commercial production of mineral oil under a bonafide belief that each well/cluster of wells is an undertaking and he enjoys the benefit of 100% tax deduction 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 vests in the State and the policy for exploitation of the said resources was also as formulated by the Central Government. In order that the private sector companies are attracted to participate in the exploration, development and production of hydrocarbons, the NELP was notified by the Central Government and it provided certain assurances to the prospective participants. Under the NELP, the Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by amending the then existing Section 80-IA. Later on Section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an undertaking . Neither Section 80-IA, Section 80-IB nor the provisions of PSC provided that the undertaking would be construed as a whole Block. 48. The Central Government would closely scrutinize and approve every stage of exploration, development and production of mineral oil. It was pointed out that the Central Government is not only in majority in the Managing Committee under PSC but also has a veto power. In the course of development of the Block and in some cases of 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 unreasonable and arbitrary. Meaning of the word underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do something in the course of pre-existing 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 of the assessee main business and the provision cannot come to the aid of the assessee. 49.4 The Apex Court laid out a set of criteria as to what qualifies as an undertaking. There must be a substantial investment of fresh capital in order to enable earning of profits attributable to that new capital. It should yield additional profits attributable to the new outlay of capital in a distinct unit and this is the heart of the matter. 49.5 Expansion of an existing business would not deprive the benefit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry oil field. First, a seismic analysis is done, then exploratory wells are drilled following which appraisal wells are drilled. Once the contractor believes that oil or natural gas has been struck, he shall give a detailed commerciality plan to the Management Committee. Once this is approved, a Development Plan is prepared for the field which contains detailed proposals for constructions, establishment and operations for all the facilities 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 Production of mineral oil is possible only when the Management Committee comprising of the Petitioner and the Government is able to declare a Commercial Discovery. Article 1.19 defines Commercial Discovery to mean discovery of petroleum reserves which has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Area or Field within the Contract Area. (vi) For every Development Area/Field there has to be a Development plant which is approved by the Management Committee comprising the Petitioner and the Government. (vii) Every Development Area will have either one well or cluster of wells. 49.15 From the above, it is clear that Commercial Production involves a step by step process identified to every Development Area comprising a well or cluster of wells. The PSC further obligates that the investment, costs, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this backdrop, one has to now consider whether insertion of Explanation by Finance (No.2) Act, 2009 with retrospective application from 1.4.2000 would be valid and sustainable in law. The above analysis would indicate that though the expression Undertaking 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 Area/Field thereby making every Development Area/Field as an independent economic unit. Every Development Area/Field is thus an Undertaking . The Petitioner placed on record the decision of the ITAT rendered in their own case for the Assessment Year 2001- 02. The Respondent contended that this matter is under challenge in appeals before the High Court which are pending. This decision, however, has not been stayed. 49.20 Looking at the whole conspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the garb of adding a definition which is clarificatory, declaratory, curative or makes small repair in the Act. 50.1 In Apollo Tyres Ltd. v. Commissioner of Income Tax, Kochi, (2002) 9 SCC 1, the Apex Court examined the object of introducing Section 115-J in the Act. The Court relied on the budget speech of the then Hon ble Finance Minister of India made in the Parliament while introducing the said Section. 50.2 In Union of India and others v. Martin Lottery Agencies Ltd. (2002) 9 SCC 209, the Apex Court in paragraph 36 to 39, 45, 50 to 52 held as under:- 36. The speech of the Hon ble the Finance Minister 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 be entitled to raise a legal fiction, but when a new type of tax is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hold that the clarification 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 65(19)(ii) of the Finance Act, 1994] we are of the opinion that the service tax, if any, would be payable only with effect from May, 2008 and not with retrospective effect. In a case of this nature, the Court must be satisfied that the Parliament did not intend to introduce a substantive change in the law. 52. As stated herein before, for the aforementioned purpose, the expressions like for the removal of doubts are not conclusive. The said expressions appear to have been used under assumption that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Income Tax Department's known position before the tribunals and the courts which are adjudicating the matter. Nothing new has been stated, it is simply a restatement of Department's position which has already placed before the tribunals and the courts. Besides, it is a well settled proposition of law that notes on clauses have no legal effect and are not binding on the courts. I may assure potential bidders for oil exploration 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 seven consecutive assessment years and he assured the potential bidders for mineral oil exploration blocks that the benefit of Section 80IB(9), as finally interpreted by the courts, will be applicable to all exploration and production contracts, whether obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Apex Court in Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited, (2015) 1 SCC 1 has held that though an Act consists of words printed on paper, it amounts to verbal communication by legislation. The technique required to understand legislation is governed by various principles of interpretation of statutes. In paragraph 27, the Court observed of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of 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 explained by Justice G.P. Singh [Principles of Statutory Interpretation, 13th Edition 2012 published by LexisNexis Butterworths Wadhwa, Nagpur] in the following manner: Declaratory statutes. The presumption against retrospective operation is not applicable to declaratory statutes. As stated in CRAIES and approved by the Supreme Court : For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. 51.5 We would also like to reproduce hereunder the following observations made by this Court in the case of Govind Das v. Income-tax Officer (1976) 1 SCC 906, while holding Section 171 (6) of the Income- Tax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, the date on which the Act came into force : 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 several decisions of this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction, and any ambiguity must be resolved against imposition of the tax. In Billings 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. 876, 880; Mutual Trust Co. v. Miller, 177 N.Y. 51, 57. 51.9 Again, in United States v. Merriam [263 U.S. 179, 44 S.Ct. 69 (1923)], the Supreme Court clearly stated at pp. 187-88-: On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In so far as amendment to Section 113 is concerned, there is no such language used and on the contrary, specific stipulation is added making the provision effective from 1st June, 2002. 51.13 Furthermore, an amendment made to a taxing statute can be said to be intended to remove 'hardships' only of the assessee, not of the Department. On the contrary, imposing a retrospective levy on the assessee would have caused undue hardship and for that reason Parliament specifically chose to make the proviso effective from 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 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 encouraging mineral oil and gases exploration and commercial production by granting seven years tax holiday to an undertaking. 56. We propose to test the argument of learned counsel for the respondent. It is not disputed that the benefit of seven years tax holiday was available to the Petitioner and is still available to the Petitioner. The question is as to whether the benefits of tax holiday of seven years was available on each undertaking which has now been taken away by the amendment made in 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 coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time. Under the garb of clarification or defining the term undertaking , the Finance Minister by amendment almost withdrew the benefit of tax deduction substantially. 59. The statement of the Finance Minister further stated that the term undertaking has been a subject matter of considerable dispute. The Finance Minister had clearly expressed the legislative 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 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. . ..I may assure potential bidders for oil exploration blocks that the benefit of Section 80-IB(9), as finally interpreted by the courts, will be applicable to all exploration and production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es commercial production for which still seven years tax holiday is available. The legislature or the Parliament had by inserting the Explanation had widened the main Section 80-IB(9) and imposed an altogether new tax by widening the tax net which would be applicable for different periods depending upon the date of starting commercial production would be substantive change in the law with different tax liability. Such substantive provision could only be construed prospective in operation. 62. For the reasons given above, we are of the considered opinion that the amendment made in Section 80-IB(9) by adding an Explanation was not clarificatory, declaratory, curative or made small repair in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT, therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. We have no hesitation to hold that the Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down. 63. Therefore, for the reasons given above, we are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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