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Oil & Natural Gas Corporation Limited Versus Commissioner Of Income Tax & Another

2015 (7) TMI 90 - SUPREME COURT

Purport and effect of exemption notification bearing No.GSR 307(E) dated 31.03.1983 issued under Section 24AA of the Surtax Act - Held that:- Section 24-AA of the Surtax Act was brought into the statute book by Act 16 of 1981 i.e. Finance Act, 1981 with effect from 1.4.1981. The explanatory notes on the provisions of Finance Act [Paragraph 11(4) and 26(1)] clearly goes to show that the legislative intent behind inclusion of Section 24-AA is to encourage foreign companies to enter into participat .....

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of exemption was intended to operate i.e. sub-section 2(a) and 2(b) of Section 24AA. If out of the two limbs where the power of exemption was intended to operate, the repository of the power i.e. Central Government, had consciously chosen to grant exemption in one particular field i.e. foreign companies covered by sub-section 2(a) of Section 24-AA, the scope of the grant cannot be enhanced or expanded by a judicial pronouncement which is what the arguments made on behalf of the appellants inten .....

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OF 2007 ,CIVIL APPEAL NO.4785 OF 2007 ,CIVIL APPEAL NO.4787 OF 2007 ,CIVIL APPEAL NO.4790 OF 2007 ,CIVIL APPEAL NO.6009 OF 2007 ,CIVIL APPEAL NO.6010 OF 2007 ,CIVIL APPEAL NO.6014 OF 2007 ,CIVIL APPEAL NO.6015 OF 2007 ,CIVIL APPEAL NO.6017 OF 2007 ,CIVIL APPEAL NO.6018 OF 2007 ,CIVIL APPEAL NO.6019 OF 2007 ,CIVIL APPEAL NO.6022 OF 2007 ,CIVIL APPEAL NO.2009 OF 2008 ,CIVIL APPEAL NO.4315 OF 2008 ,CIVIL APPEAL NO.4316 OF 2008 ,CIVIL APPEAL NO.4318 OF 2008 ,CIVIL APPEAL NO.4319 OF 2008 ,CIVIL APPE .....

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erred to as the Surtax Act ). 2. The question posing for an answer revolves around the true and correct purport and effect of exemption notification bearing No.GSR 307(E) dated 31.03.1983 issued under Section 24AA of the Surtax Act. For a quick understanding of the question that arise for consideration, the provisions of Section 24-AA of the Surtax Act and the contents of the notification bearing No.GSR 307(E) may be extracted below : 24AA. Power to make exemption, etc., in relation to participa .....

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purposes, of this sub-section, "foreign company" shall have the meaning assigned to it in clause (4) of section 80B of the Income-tax Act. (2)The foreign companies referred to in sub-section (1) are the following, namely:- (a) foreign companies with whom the Central Government has entered into agreements for the association or participation of that Government or any person authorized by that Government in any business consisting of the prospecting for or extraction or production of mi .....

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nation.-For the purposes of this section, "mineral oil" includes petroleum and natural gas. GSR No. 307(E) - Exemption from surtax of foreign companies with whom Central Government has ente... Exemption from surtax of foreign companies with whom Central Government has entered into agreements for participation in business of prospecting for or extraction of mineral oils -Notification issued under sub-section (1) Whereas the Central Government is satisfied that it is necessary and expedi .....

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ent hereby provides that no surtax shall be payable by such foreign companies. Explanation : For the purposes of this notification : (a) "foreign company" shall have the meaning assigned to it in clause (4) of section 80B of the Income-tax Act, 1961 (43 of 1961); (b) "mineral oil" includes petroleum and natural gas. Notification : GSR No. 307(E), dated 31-3-1983. 3. Section 24-AA of the Surtax Act, as it would appear, vests in the Central Government the power to make exemptio .....

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in any business consisting of the prospecting or extraction or production of mineral oils. The second category of foreign companies mentioned in sub-section (2) is foreign companies that may be providing services or facilities or supplying any ship, aircraft, machinery or plant in connection with any business of prospecting or extraction or production of mineral oils carried on by the Central Government or any authorised person. Specifically the Section states that mineral oils will include pet .....

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anies for services or facilities or for supply of ship, aircraft, machinery and plant, as may be, all of which were to be used in connection with the prospecting or extraction or production of mineral oils. Such agreements do not contemplate a direct association or participation of the ONGC (a person authorized by the Central Government by notification dated 2.8.1989) in the prospecting or extraction or production of mineral oils but involved the taking of services and facilities or use of plant .....

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exemption only to foreign companies with whom there were agreements for participation by the Central Government or the person authorized in the business of prospecting, extraction or production of mineral oils. The agreements in question, according to assessing authority, were, therefore Service Agreements and hence covered by sub-section 2(b) of Section 24-AA of the Surtax Act and were accordingly beyond the purview of the exemption notification. 7. The said view was reversed by the learned Ap .....

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ed senior counsel for the Revenue. 9. The respective arguments though have been elaborate the point urged is brief. Shri Datar would contend that as the exemption notification contains/uses the same language as found in sub-section 2(a) of Section 24-AA of the Surtax Act its applicability should be understood with reference to the existence of agreement with the foreign companies rather than the immediate purpose of such agreement, namely, involvement of the Central Government or the authorized .....

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or extraction or production of mineral oils, Sub-section 2(a) of Section 24-AA of the Surtax Act must be understood to include even such foreign companies with whom the ONGC had executed agreements to provide such services or to make available plant or machinery. The exemption notification dated 31.3.1983 must be understood in the above light, it is argued. If that be so, according to Shri Datar, sub-section 2(b) of Section 24-AA would only include foreign companies with whom the ONGC has no di .....

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n 24-AA and the exemption notification must be construed by its plain and unambiguous language which indicate two separate situations in respect of which power to grant exemption is conferred by section 24-AA. It is contended that though the Central Government has also been empowered to grant exemptions in respect of the situations covered by sub-section 2(b), namely, where only services are provided, yet, the Central Government while issuing the exemption notification dated 31.3.1983 had clearl .....

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n or production of mineral oils are clearly excluded from the purview of exemption by the notification in question, it is contended. 11. It will not be necessary to traverse the long line of decisions of this Court dealing with the fundamental principles of interpretation of a taxing statute or an exemption notification. The core of aforesaid principles have been reiterated in a recent decision of this Court in Commissioner of Income Tax-III Vs. Calcutta Knitwears, Ludhiana(2014) 6 SCC 444. It i .....

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erpreting the provisions of a fiscal legislation should neither add nor subtract a word from the provisions of instant meaning of the sections. It may be mentioned that the foremost principle of interpretation of fiscal statutes in every system of interpretation is the rule of strict interpretation which provides that where the words of the statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule. (Swedish Match AB v. SE .....

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ation, if a person says this is a pencil , then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a .....

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be strictly construed; common sense approach, equity, logic, ethics and morality have no role to play. Nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less. (J. Srinivasa Rao v. State of A.P. and Jagdambika Pratap Narain Singh v. CBDT.) Specifically, insofar as an exemption notification is concerned the view expressed in Commissioner of Central Excise, New Delhi Vs. Hari Chand Shri Gopal and Others(2011) 1 SCC 236 wo .....

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nditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. 30. In Novopan India Ltd. this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must .....

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dment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. 12. Section 24-AA of the Surtax Act vests power in Central Government, inter alia, to grant exemption to foreign companies with whom agreements have been executed by the Central Government for association or participation in the prospecting or extraction or production of mineral oils and also to foreign compan .....

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business. There is nothing in the provisions of the Act which could have debarred the Central Government from granting exemptions to both categories of foreign companies mentioned above or to confine the grant of exemption to any one or a specified category of foreign companies. Reading the notification No.GSR 307(E) dated 31.3.1983 it clearly appears that the exemption has been granted only to foreign companies with whom the Central Government had executed agreements for direct association or p .....

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cifically omitted in the exemption notification. The power under Section 24-AA of the Surtax Act, as already noticed, is wide enough to include even this category of foreign companies. The omission of this particular category of foreign companies in the exemption notification, notwithstanding the wide amplitude and availability of the power under Section 24-AA, clearly reflects a conscious decision on the part of the Central Government to confine the scope of the exemption notification to only t .....

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