TMI Blog2016 (2) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... slation is considered it becomes clear that there was no scope for bringing in the concept of voluntarily surrender/forced surrender. The Act has not provided such terms in the section and therefore there was no justification in denying the assessee a legitimate benefit. We find that the PSC had distinguished relinquishment and termina -tion of contracts. As per Article4 of PSC(Pg-1. 19 of the PB)‘if the contractor exercises the option provided in paragraph (b)of Article 3. 5 the contractor shall, after any development area has been designated, relinquish all of the contract area not included within the said develop ment area’. Article-30of PSC(pg. 1. 84)deals with termination of contract. It provides 10 circumstances under which the government could terminate the contract. Clearly relinquishment and termination of agreement are two different concepts as per the PSC. In his letter, dated 28. 03. 2007, the DGHC has informed the assessee that its contract stood relinquished The termination condition of the PSC deals with totally different situations. We find that the letter dt. 28. 3. 2007 talks of Article -4 and not of Article- 30 of the PSC. Clearly, the case of the assessee doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducing property, that DGHC had terminated the contract, that the assesse was required to fulfill the terms laid down for extension as per the policy, that it had failed to do so, that the government had directed the assessee to relinquish the oil fields. The AO also referred to the Article 30. 3 of the production sharing contract (PSC) and held that the assessee was penalized by the government for failing to adhere to the terms laid down in its contract and that it was forced to relinquish the block. Finally, he held that the assessee s claim for deduction of ₹ 99. 96 crores, u/s. 42 was liable to be rejected. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, it was argued that the AO had placed undue stress on the require -ment of surrender for the purposes of allowing the deduction that the section provided that the deduction in terms of the PSC should be allowed in lieu of /in addition to what was allowed under the Act, that the agreement would prevail over the provisions of the Act, that the AO had not questioned the expenses claimed u/s 42 of the Act pertaining to exploration and drilling cost, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s did not yield results, that it informed the Bombay Stock Exchange about not finding oil in the wells, that it had requested for extension as per the existing policy, that denial of extension could not be termed termination, that in the agreement there was separate clause for relinquishment, that in the letter of the DG the assessee was informed that its agreement stood relinquishment, that terms like voluntary surrender of forced surrender have not been used in any of the documents i. e. PSC or other documents. He referred to the pages 1. 17, 9. 1, 2. 1, 3. 1, 4. 1, 1. 19 and 4. 2 of the Paper book(PB). 5. We have heard the rival submissions and perused the material before us. We find that to encourage the oil exploration Government of India introduced a new policy and simultaneously made amendment in the Act, that the assessee had made an application in pursuance of PSC and was allotted area for exploration w. e. f. 16. 03. 2001, that it was allowed to explore the area for seven years in three phases, that it had informed the BSE that it could not oil in two of the wells, that in the year 2006 Government notified that extension could be granted to the earlier allotees, that v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion period, hence, the block CY-OSN-97/1 stands relinquished as per Article 4. 3 of PSC w. e. f the date of completion of Phase-III i. e. 15. 3. 2008 The termination condition of the PSC deals with totally different situations. We find that the letter dt. 28. 3. 2007 talks of Article -4 and not of Article- 30 of the PSC. Clearly, the case of the assessee does not fall in the category of termination. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal or factual information. So, confirming his order, we decide effective ground of appeal against the AO. ITA/4042/Mum/2012: 6. The first effective ground of appeal(Ground No. 2-6), raised by the assessee is about claim for deduction made u /s. 42 (1) (b)of the Act amounting to ₹ 4. 77 crores. During the assessment proceedings, the AO disallowed the claim made by the assessee, without deliberating upon the submissions made by it. 7. Before the FAA, the assessee argued that as per the provisions of section 42(1)(b) of the Act, expenditure incurred before or after the commencement of the commercial production could be claimed as deduction in the computation of profits an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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