TMI Blog1998 (8) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... Canada. It is engaged in the business of exploration and development of oil and gas fields. The applicant entered into a collaboration agreement with Gujarat State Petrochemical Corporation Ltd. (GSPCL), and thereafter jointly entered into a contract with the Central Government of India, in September, 1994, for exploration and development of oil and gas fields at various places. The project involves, inter alia, drilling, completion and testing of development of oil wells, the drilling and completion of wells for gas or water injection, and laying of gathering lines. The contention of the applicant is that these activities come within the scope of section 42 of the Income-tax Act. Its total income can only be computed, after taking into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include petroleum and natural gas. Therefore, these special provisions for deduction cannot be denied to the assessee under any circumstances. It was argued that section 42 was incorporated in this Act because huge investments had to be made for the business of oil prospecting. Our attention was drawn to section 293A by which the Central Government has been empowered to make special exemptions in relation to the companies in the business of prospecting for or extraction or production of mineral oil, etc. In fact, several notifications have been issued by the Government in exercise of its power under section 293A to give relief to the assessees engaged in the business of exploration and extraction of oil. It was argued that the importance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956) : Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under the Act, the method and rates for calculation of depreciation shall correspond to the method and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year falling within the relevant previous year. Explanation.-For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f has been given to an assessee under any other section that too will have to be allowed. Section 42, however, cannot override section 115JA which introduces a legal fiction by which thirty per cent. of the book profit of an assessee is deemed to be his total income. Section 115JA does not seek to levy tax on the business income of an assessee, but on his total income. Section 42 which starts with the words For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils . . . Section 42 will be applicable only when computation of profit and loss of the business of prospecting for or extraction or production of mineral oil is taken up. Section 293A also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecting for or extraction or production of mineral oils carried on by that Government or any person specified by that Government in this behalf by notification in the Official Gazette ; and (c) employees of the persons referred to in clause (a) or clause (b). (3) Every notification issued under this section shall be laid before each House of Parliament. Explanation.-for the purposes of this section,- (a) mineral oil includes petroleum and natural gas ; (b) status means the category under which the assessee is assessed as individual , Hindu undivided family and so on. Section 293A has nothing to do with computation of total income. It lays down that the Central Government may by notification grant exemption or red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular course of assessment of income. If the total income, thus calculated, falls short of thirty per cent. of book profit, the special provisions of section 115JA come into operation. There is no scope for any deduction or allowance under any other provision of the Act at this stage. The section is to apply notwithstanding anything contained in any other provisions of this Act . Book profit has been defined and explained in section 115JA. This provision became necessary because a large number of companies were not paying any tax in spite of making huge profits by taking advantage of the various provisions for deduction and allowances contained in the Act. The total income thus computed was way below the taxable limit. To circumvent t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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