TMI Blog2018 (7) TMI 1954X X X X Extracts X X X X X X X X Extracts X X X X ..... which shows that amount spent by the assessing is not allowable as revenue expenditure under section 37 (1) of the act. It is also not the argument of the revenue that such expenditure incurred by the Assessee is capital in nature. Furthermore, AR has also pressed into several decisions which say that that expenses incurred towards extension of business which was subsequently abandon or did not fructify, are allowable. Therefore in view of the own case [ 2017 (4) TMI 1145 - ITAT DELHI] wherein it is been held that the expenses for purchase of this kind of data is unnecessary revenue expenditure required to be incurred by the Assessee for the purpose of its business and hence is allowable as revenue expenditure, we also direct AO to allow the expenditure incurred by the Assessee on purchase of data and other relevant expenses AO is directed to allow the expenditure incurred by the taxpayer on cost of purchase of seismic data, general and administrative expenses in connection with proposed NELP-VIII and staff cost and project management and consultancy charges Disallowance of expenditure incurred by the taxpayer on non-producing block - the expenditure incurred by the taxpaye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pert appointed as per settlement agreement @ 1.7%. So, we are of the considered view that the matter is required to be remanded back to the AO to decide afresh after providing an opportunity of being heard to the taxpayer by following the rule of consistency. Write back of provisions of doubtful debts - AO taxed write back amount of ₹ 20,67,360/- on the ground that the taxpayer has not given any reason for writing back provisions for doubtful debts and claiming the same as expenditure in the computation of income - as contended by AR that the AO has failed to appreciate that provisions for doubtful debts credited in the preceding year has not been claimed as deduction in the year in which such provision was credited - HELD THAT:- The contention raised by ld. AR for the taxpayer is sustainable because when the provisions of doubtful debts of ₹ 20,67,360/- credited in the preceding year has not been claimed in the year in which such provisions were credited, the write back of the same in the subsequent year i.e. year under assessment is not taxable as it would amount to double taxation. So, we are of the considered view that it is merely an arithmetic calculation and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Companies Act, 1956 and has duly got prepared audited report of an independent auditor on the basis of physical verification and in view of the maintenance of inventory, the disallowance made by the AO/DRP is not sustainable in the eyes of law. See ALFA LAVAL (INDIA) LIMITED. [ 2007 (11) TMI 281 - SUPREME COURT] - when complete details about the inventory written off has been given sufficient to identify items of inventory to be written off in the books of account, the same is required to be allowed. AO is directed to allow the amount on account of inventory written off after due verification Disallowance of depreciation and depletion - addition being the difference of depreciation/ depletion amount between the tax audit report and the computation - HELD THAT:- When the taxpayer has duly explained that the difference of depreciation of ₹ 48,70,14,075/- is due to the fact that in previous year, the amount of Global IT T cost paid to BGIL was considered as capital in nature by the taxpayer and the same was capitalized on which taxpayer had claimed depreciation, but tax auditor report has considered this as revenue in nature, no disallowance can be made on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Apex Court in case of CIT vs. Enron Oil Gas Limited [ 2008 (9) TMI 3 - SUPREME COURT] we are of the considered view that the income earned by the taxpayer in foreign currency pursuant to the PSC entered into with Government of India is governed by the agreement of PSC and the foreign exchange losses on account of foreign currency translation is an allowable deduction while computing the total income of the taxpayer. In such circumstances, provisions of PSC are to be applied and the disallowance made by AO/DRP on account of difference in revenue is not sustainable, hence allowable subject to verification by the AO. Credit of tax deducted at sourceDenied - HELD THAT:- TDS stated to have been deposited by the taxpayer. AO is directed to grant the credit of the TDS claimed by the taxpayer subject to verification. Interest to the taxpayer u/s 234B - AR contended that the interest u/s 234B is not chargeable to taxpayer it being a non-resident whose income is subject to tax deduction at source and further contended that this issue has already been determined in favour of the taxpayer in its own case for AY 2010-11 - HELD THAT:- Following the order passed by the coordinate B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the TP adjustment computed by the TPO was only INR 2,400,433,920. 3.1 Without prejudice to the assessee's contentions, the transfer pricing adjustment made by the Ld. AO/DRP/ TPO should be limited to the value of international transactions and cannot exceed INR 240 crores as per the ALP determined by the Ld. TPO under the CUP method which was upheld by Hon'ble DRP Ground No.4: Erroneously disregarded the directions of the Hon'ble DRP for AY 2009-10 and AY 2010-11 4.1 The learned AO I DRP I TPO erred in disregarding the directions issued by the Hon'ble DRP in the case of the Appellant for the prior years i.e. AY 2009-10 and AY 201011 (which have also been affirmed by Hon'ble ITAT) even though the facts and circumstances of its case and the business model of the Appellant continued to remain the same. Ground No.5: Erroneously questioning of commercial expediency of the Appellant 5.1 The learned AO I DRP I TPO erred in law and on facts by questioning the commercial expediency of the Appellant in availing the intra-group services from its associated enterprise ( AE ) and in changing from floating interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 11: Disallowance of branch office expenditure 11.1 The learned AO / DRP erred in law and in facts in disallowing the branch office expenditure of ₹ 40,70,92,375 by treating it as pre-operative in nature. 11.2 The learned AO / DRP erred in not appreciating that the said expenditure was incurred wholly and exclusively for the purpose of the Appellant's business in India. 11.3 The learned AO erred in law and in facts in observing that the payments made which are included in the branch office expenditure, were liable to be disallowed under section 40(a)(ia) of the Act. 11.4 The learned AO erred in not noting that the claim regarding double disallowance of ₹ 52,39,273, being depreciation included in branch office expenditure, was already rectified by the learned AO in its order dated 21 February 2017. Ground No. 12: Disallowance of expenditure incurred on non-producing Production Sharing Contracts ( PSCs ) 12.1 The learned AO / DRP erred in law and in facts in disallowing the expenditure of ₹ 1,96,49,04,712 incurred on non-producing PSCs. 12.2 Without prejudice, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Loss Account which has been audited by an independent auditor. Ground No. 18: Disallowance of depreciation and depletion 18.1 The learned AO erred in law and in facts in disallowing depreciation of ₹ 48,70,14,075 being the difference of depreciation amount between the tax audit report and the computation. 18.2 The learned DRP erred in concluding that the disallowance of depreciation of ₹ 48,70,14,075 was rectified by the learned AO vide order dated 21 February 2017. 18.3 The learned AO / DRP erred in not appreciating that this difference is on account of depreciation claimed on Global IT T expenditure and that depreciation claim on Global IT T expenditure was allowable as held by the Hon'ble IIAT in assessee's own case for AY 2010-11. 18.4 The learned AO erred in law and in facts in disallowing depletion of ₹ 3,47,69,091 being the difference of depletion amount between the tax audit report and the computation 18.5 The learned DRP erred in not dealing with the objection on disallowance of depletion of ₹ 3,47,69,091. 18.6 The learned AO / DRP erred in not apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 25: General 25.1 The Appellant submits that the AO, TPO and DRP have erred in arriving various unwarranted and erroneous conclusions unsupported by any relevant material in deciding the case. 25.2 The AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 25.3 The Appellant submits that each grounds of appeal are without prejudice to one another. 2. Briefly stated the facts necessary to adjudicate the issues in controversy are : M/s. BG Exploration and Production India Limited, the taxpayer is a company incorporated with limited liability in the Cayman Islands and is into the business of prospecting, exploration and production of crude oil and natural gas, being 100% subsidiary of BG Mumbai Holdings Limited (a company incorporated in Mauritius) having its project office in India for undertaking the Indian operations. BG International Limited (BGIL) is a company incorporated in the United Kingdom with more than 40 years of experience and technical expertise relating to exploration and production activities in the oil and gas sector. 3. The taxpayer has entered into Production Sharing Contracts ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport services showing margin of cost plus 12%. The taxpayer benchmarked the payment of interest by obtaining quotations corroborated with independent companies comparable payment of interest on ECBs. However, Transfer Pricing Officer (TPO) rejected the method adopted by the taxpayer and used CUP as the MAM in the intra group services. Declining the contentions raised by the taxpayer, TPO proceeded to propose TP adjustment qua international transactions undertaken by the taxpayer as under :- 27. On the basis of discussion made above the total adjustments proposed in respect of international transactions under taken by the taxpayer are as given below: S.No. Nature of international transaction Adjustment u/s 92CA (INR) 1 Intra Group Services* 3,832,483,013 2 Interest Payment 739,673,740 Total 457,21,56,753 The above shortfall of ₹ 3,832,483,013 has been propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KG-DWN-2002/2 Contract area 5 MN-DWN-2002/2 Contract area 6 KG-DWN-2009/1 8. It is also not in dispute that the commercial production has only started in first 2 PSC i.e. Panna Mukta Oil Field and South Tapti Oil Field area. It is also not in dispute that the taxpayer has aggregated all transactions and used TNMM at entity level and found its international transactions at arm s length. It is also not in dispute that after directions issued by the DRP, proposed adjustment of ₹ 457,21,56,753/- by the TPO has been revised to ₹ 3,359,160,094/- which is as under :- Nature of international transactions Adjustment u/s 92CA (INR) Adjustment after the direction of DRP Intra Group Services 3,832,483,013 2,619,486,354 Interest Payment 739,673,740 739,673,740 Total 4,572,156,753 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge and Time writing charges 712,561,730 3 Payroll expenses 331,112,844 4 Reimbursement of expenses 171,954,384 Total Amount 2,596,001,146 12. The ld. AR for the taxpayer contended that the international transactions qua intra group services received by the taxpayer was required to be benchmarked by applying TNMM on the ground that the transaction of intra group services were closely linked with the business activities of taxpayer qua exploration and production of oil and gas. 13. The ld. AR for the taxpayer contended that the issue in controversy has already been decided in favour of the taxpayer in its own case for AY 2010-11 in ITA No.1170/Del/2015 order dated 24.04.2017. We have gone through the order (supra) referred to by the ld. AR for the taxpayer in which identical issues were raised and has been decided in favour of the taxpayer by returning following findings :- 72. On the examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate method , hence, directing the Ld. transfer pricing officer to delete the adjustment proposed of ₹ 3 329766244/ . In the result ground No. 1 to 3 of the appeal of the revenue are dismissed. 14. So, following the decision rendered by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2010-11 (supra), we deem it necessary to remand this issue to ld. DRP to decide afresh to benchmark the international transactions undertaken by the taxpayer by applying the TNMM as MAM by providing an opportunity of being heard to the taxpayer, in the light of the decision rendered by the coordinate Bench of the Tribunal in AY 2010-11. So, grounds no.1 to 9 are determined in favour of the taxpayer for statistical purposes. GROUND NO.10 15. Ground No.10 is dismissed having not been pressed during the course of arguments. GROUND NO.11 16. AO/DRP have disallowed the exploration and business development expenses of ₹ 40,70,92,375/- incurred by the Branch Office by treating the same as pre-operative in nature. It is the case of the taxpayer that it is established on record that the Branch Office has been established in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 19. Undisputedly, this issue has come up for consideration before the coordinate Bench of the Tribunal in taxpayer s own case in AY 2010-11 (supra) and has been decided in favour of the taxpayer by returning following findings :- 56. Now coming to the claim of the deduction of expenditure of ₹ 22098 3295/ on account of purchase of seismic data and general and administrative expenses in connection with the proposed NELP VIII, It is submitted by the Assessee that these were the expenses incurred by the Assessee with respect to the offers which were invited for the 8th offer of blocks for national exploration licensing policy for which the Assessee has to purchase the data for the bidding purposes. The other expenses which are the necessary general and administrative expenses were incurred for project management, consultancy services, etc and also staff cost and project management expenses were incurred. These expenses were disallowed by Ld. Assessing Officer holding that these are expenses for the future projects of the Assessee for which even the PSC is not executed. The Ld. Authorised Representative has submitted that this issue of allowability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that expenses pertaining to exploring feasibility of expansion or extension of business are revenue expenditure and not capital expenditure. The expenditure so incurred by the Assessee in the normal course of business of exploration and production of oil, being revenue in nature, is liable to be allowed as a deduction. Similar claim was also made by the Assessee in the earlier year. We, therefore, direct the Assessing Officer to allow the same as revenue expenditure. As we have allowed ground Nos. 3 to 3.2, the alternate ground No. 3.3 as taken by the Assessee become infructuous. [Extracted Taxmann.com][underline supplied by us] Neither the Ld. Assessing Officer nor the Ld. Departmental Representative could press any other judicial precedent which shows that amount spent by the assessing is not allowable as revenue expenditure under section 37 (1) of the act. It is also not the argument of the revenue that such expenditure incurred by the Assessee is capital in nature. Furthermore, the Ld. AR has also pressed into several decisions which say that that expenses incurred towards extension of business which was subsequently abandon or did not fructify, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detail of expenditure incurred on non-producing blocks which is as under :- Block Amount (Rs.) KG-OSN 2004/1 1,08,03,21,692 MN-DWN-2002/2 58,53,00,833 Total 1,66,56,22,525 23. The ld. AR for the taxpayer contended that section 42 is not applicable as it allows benefit/deduction to the eligible taxpayer in addition to the allowance permissible under the Act and as such, these deductions are allowable u/s 37(1) of the Act and relied upon decision rendered by the coordinate Bench of the Tribunal in a case cited as ONGC Videsh Ltd. vs. DCIT 37 SOT 97. 24. The ld. AR for the taxpayer has also contended that this issue has also been decided in favour of the taxpayer in its own case for AY 2010-11. For ready perusal, operative part of the order is extracted as under :- 54. Section 42(1) makes it clear that for the purpose of computing the profits and gains of any business consisting of prospecting, extraction or production of mineral oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art it is apparent that out of the total expenditure incurred of ₹ 931819021/ the Ld. Assessing Officer has allowed the expenditure of ₹ 471505233/ which is the cost of respective PSC and shared with JV partners. The balance cost which is not shared by the JV partners amounting to ₹ 460313788/ was disallowed for the reason that these cost have not been shared by the JV partners and therefore it is not incurred for the purposes of the business of the Assessee and hence disallowable. Further sum of ₹ 220983295/ included in the disallowance of ₹ 460313788/ was pertaining to the purchase of seismic data for exploring new opportunities in the business of the company under the pretext that these are with respect to the future businesses which has not yet commenced. Therefore, primary the disallowances of ₹ 460313788/ includes a sum of ₹ 22098 3295/ for purchase of seismic data and balance amount primarily with respect to time writing cost and development expenses. The time writing charges as it is explained by the Assessee are for the purpose of drilling and subsurface inputs, analysis and administrative expenses with respect to executive, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MN DWN 2002/2 of Rs.105241649 iii) KG-DWN-98/4 of Rs.62450283 cannot be disallowed. In view of this we direct the Ld. Assessing Officer to delete the disallowance made with respect to about 3 items. 25. Keeping in view the facts and circumstances of the case wherein the taxpayer has brought on record the complete details of the expenditure incurred and there is no dispute between the parties to the appeal that all the expenses have been incurred for furtherance of its business, though incurred in support to the PSC contracts executed by the taxpayer, the same cannot be disallowed merely on the ground that it is not shared by others, particularly, when it is not disputed that these expenses have been incurred wholly and exclusively for the purpose of business of taxpayer. 26. Moreover, the AO has not disputed the incurrence of expenses for the purpose of business. Even otherwise, the expenses incurred by the taxpayer for furtherance of its business cannot be disallowed merely on the ground that the other party in the joint venture has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provisions which is allowable as deduction in terms of principles laid down by the Hon'ble Supreme Court in the case of Bharat Earth Movers v. Commissioner of Income-tax (supra). In the case before Supreme Court, the provision was made on adhoc basis. Whereas in the current case, the provision is made on the basis of Memorandum of Understanding which is an estimate agreed by both the part to the agreement. Thus, it is submitted that the estimate in the current scenario is made on a sound basis and ought to be allowed to the appellant. 29. The ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the taxpayer contended that the settlement agreement relied upon by the taxpayer was not produced before AO which otherwise says that the transportation loss is to be determined by the expert to be appointed by joint venture partner. 30. When we examine the facts and circumstances of the case in view of the admitted case of the taxpayer that during the AY 201617, independent expert appointed by the joint venture partners had determined the loss on condensate at 1.7% and without prejudice, the taxpayer also made a prayer for allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the profit loss account as per PSC where foreign exchange loss is considered as an allowable deduction, AO has erred in disallowing the same and relied upon the decision rendered by Hon ble Uttarakhand High Court in case cited as CIT vs. Enron Oil and Gas India Limited 305 ITR 68, which was affirmed by Hon ble Supreme Court reported in 305 ITR 75. 33. Hon ble Uttarakhand High Court in case cited as CIT vs. Enron Oil and Gas India Limited (supra) has decided the identical issue in favour of the taxpayer by returning following findings :- Held, dismissing the appeal, that under article 1.6.1 of the accounting procedure set out in Appendix C to the production sharing contract, the expenditure incurred in foreign exchange by the co-venturer during any particular calendar month had to be converted into Indian rupee at the rate which had to be determined at the end of the calendar month. When the Revenue was accepting the tax on the profits/gains accrued to the assessee out of the change in the foreign exchange rates in other assessment years, it could not deny deduction on account of loss incurred for that reason. The Commissioner (Appeals) as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Amount Tanker Related Costs 115,534,442 Tug Boat Costs 70,464,943 Safety Environment Materials 11,355 Technical Engineering Services 316,786,095 Less: Reversal of Water Transportation other charges (8,344,443) Total BG Exclusive Production Cost. 494,452,392 The above expenditure are in the nature of tanker expenditure, tug and boat expenditure, safety environment and material expenditure as well as technical and engineering services. During the course of assessment proceedings, the Assessee has furnished the details of those expenditure. Merely because the joint-venture partners are not sharing the cost/expenses which is been incurred by the Assessee, It does not become disallowable in the hands of the Assessee. We find no such condition existing either under section 42, or under section 37 (1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail at the time of determining Arms; Length of the transaction. In view of no adverse inference from the lower authorities on the details submitted, we are constrained to allow the claim of the Assessee of deductibility of the above expenditure of ₹ 316786095/- . In the result ground No. 3 of the appeal of the Assessee is allowed. 37. Keeping in view the fact that facts and circumstances of the case and the fact that business model has not undergone any change since AY 2010-11 and by following the decision rendered by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2010-11, we are of the considered view that the cost of services availed of by the taxpayer required by PSC with regard to its standard of operation including the quality of execution of work, access to latest industry information and global updates, safety of its employees and the environment etc., cannot be disallowed merely on the ground that the said expenses have not been borne by the joint venture partner, particularly when it is not disputed by the Revenue that the expenditure were made for commercial expediency. So, we hereby order to allow the claim of the taxpayer for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k has been taken as the value of the opening stock in the subsequent year. Moreover, it is also not disputed that the obsolete items were in fact sold in the subsequent year at a price less than 10 per cent. of the cost. In the absence of any basis for valuing the obsolete items at 50 per cent. of the cost, the Tribunal could not have upheld the findings of the Assessing Officer. 40. Hon ble Delhi High Court in case cited as CIT vs. Bharat Commerce and Industries Ltd. 240 ITR 256 (Del.) held that, An assessee is free to adopt a particular method of valuation of its closing stock which it has to follow regularly from year to year. At the same time it is well settled that irrespective of the basis adopted for valuation for earlier years, the assessee has an option to change the method of valuation of closing stock, provided the change is bona fide and followed regularly thereafter. 41. In view of the settlement proposition of law discussed in the preceding paras, we are of the considered view that when the taxpayer has prepared obsolete inventory in accordance with the system of accounting regularly followed by it in compliance to section 211 (3C) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was considered by the auditor as revenue in nature but the taxpayer has suo motu disallowed the said expenses and claimed the depreciation in the previous years. It is further contended by ld. AR that identical issue has been decided in favour of the taxpayer in its own case for AY 2010-11 (supra). Ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the taxpayer relied upon the orders of AO/DRP. 44. Coordinate Bench of the Tribunal in AY 2010-11 (supra decided the identical issue in favour of the taxpayer by returning following findings :- 41. We have carefully considered the rival contention and also noted the facts that BGIL has acquired and developed certain IT infrastructure and software for the benefit of BG Group of companies. Such assets include production data base management system, SAP up gradation, efficient budgeting and forecasting systems, field development training programs, geosciences/geophysics simulations, integrated asset modeling systems, sophisticated e-mail facility etc. BGIL has allocated the cost of these assets to its Group companies including Assessee at cost based in allocation methodology decided at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same was capitalized on which taxpayer had claimed depreciation, but tax auditor report has considered this as revenue in nature, no disallowance can be made on account however subject to the verification by the AO. 46. So far as question of amount of difference of depletion of ₹ 3,47,69,091/- is concerned, the Hon ble Bombay High Court in case of Melmould Corporation vs. CIT 202 ITR 789 decided the identical issue by returning following findings :- Thus, the value of the closing stock of the preceding year must be the value of the opening stock of the next year. The change therefore, has to be effected by adopting the new method for valuing the .closing stock which will, in its turn, become the value of the opening stock of the next year. If instead, a procedure is adopted for changing the value of the opening stock, it will lead to a chain reaction of changes in the sense that the closing value of stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. 47. So, following the decision rendered by Hon ble Bombay High Court in Melmould Corporation vs. CIT (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputedly, the taxpayer has not claimed the interest amount of ₹ 2,31,62,145/- while computing its profit for the year under assessment and consequently, disallowed by the AO/DRP being excess interest claim of capital nature. 52. The ld. AR for the taxpayer contended that since the taxpayer has already made a disallowance of ₹ 2,31,62,145/- in its computation of income, the addition thereof made by the AO is not sustainable. However, we are of the considered view that since the amount has not been claimed by the taxpayer while computing its profit in the year under assessment, the issue is required to be sent back to the AO for verification and to decide accordingly after providing an opportunity of being heard to the taxpayer. Consequently ground no.21 is determined in favour of the taxpayer for statistical purposes. GROUND NO.21 53. AO/DRP have made addition of ₹ 63,65,958/- on account of difference in revenue as per Form 26AS and profit loss account. It is contended by ld. AR for the taxpayer that the difference of ₹ 63,65,958/- was on account of difference in foreign exchange rate which is to be governed by the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, in the case of any single non-US Dollar transaction in excess of the equivalent of one hundred thousand us Dollars (US$ 100,000), the conversion into US Dollars shall be performed on the basis of the average of the applicable exchange rates for the day on which the transaction occurred. 54. When the taxpayer has booked excess revenue in accordance with the Rule 115 of the Income-tax Rules, 1962 (for short the Rules ), accounting as per PSC would oblige the taxpayer to reverse the excess revenue and consider it as foreign exchange loss. The taxpayer relied upon the decision rendered by Hon ble Supreme Court in CIT vs. Enron Oil Gas Limited 305 ITR 75. 55. Hon ble Apex Court in CIT vs. Enron Oil Gas Limited (supra) while deciding the identical issue held that, Section 42 is a complete code by itself for deduction in case of business of prospecting the extraction or production of mineral oils. The section is inoperative by itself and becomes operative only when it is read with the production sharing contract. The section was enacted to ensure that where the structure of the production sharing contract is at variance with accounting prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the rival contentions and also perused the relevant judicial precedents cited before us. In the decision cited by the Ld. Authorised Representative in case of CIT versus GE packaged power incorporation (373 ITR 65) in Para No. 19, the Hon ble high court has considered the decision cited by the Ld. Departmental Representative as under:- 19. Alcatel Lucent USA Inc (supra), in any event, can be distinguished on the ground that the Court was persuaded to confirm the levy of interest under Section 234B, only on account of the equities that needed to be balanced in those peculiar facts, in favour of taxability. This is evident from the following words of the Court: 26. It further seems to us inequitable that the Assessee, who accepted the tax liability after initially denying it, should be permitted to shift the responsibility to the Indian payers for not deducting the tax at source from the remittances, after leading them to believe that no tax was deductible. The Assessee must take responsibility for its volte face. Once liability to tax is accepted, all consequences follow; they cannot be avoided. After having accepted the liability to tax at the first appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident company, entire tax was to be deducted at source on payments made by payer to it and there was no question of payment of advance tax by Assessee; therefore, revenue could not charge any interest under section 234B from Assessee, which is pending for adjudication. However the decision of the Hon high court is to be followed by us , if the same is not stayed by the hon supreme court, therefore respectfully following the decision of the Hon ble high court we direct the Ld. Assessing Officer to not to charge interest under section 234B of the act on the income of the Assessee which is subject to or liable to tax deduction at source. In view of this we set aside ground No. 9 of the appeal of the Assessee back to the file of the Ld. Assessing Officer to recompute the interest under section 234B of the act accordingly. 60. Following the order passed by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2010-11 which is on the basis of decision rendered by Hon ble Uttarakhand High Court in case of CIT vs. Maersk Company Limited (supra) and Hon ble Delhi High Court in case of DIT vs. GE Packaged Power Incorporation (supra), we are of the considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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