TMI Blog2019 (9) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... backdrop that the CIT(A) has rightly followed the hon'ble jurisdictional high court s decision in taxpayer s favour. Same is the fate of the Revenue s next argument that assessee s each oil well ought not to be treated as a separate eligible undertaking. Hon'ble Gujarat high court s and this tribunal decision in Nicco Laboratories Ltd. [ 2015 (3) TMI 986 - GUJARAT HIGH COURT] decided the very issue in assessee s favour that each oil well can indeed be treated as a separate eligible undertaking Reliance of the revenue on hon'ble Calcutta high court s judgment in assessee s case ( 1991 (6) TMI 17 - CALCUTTA HIGH COURT ) treating the oil wells as a composite plant for sec. 32(2A) investment allowance deduction does not apply so far as sec. 80IB deduction claim is concerned. Assessee had used its machines or plant for other purposes as per page-6 of the assessment order dated 30.11.2005 also does not carry merit. We notice first of all that the Assessing Officer had nowhere indicated as to what kind of plant and machinery had been used for other purposes. Be that as it may, hon'ble apex court s judgment in Bajaj Tempo Ltd. [ 1992 (4) TMI 4 - SUPREME COURT] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its books of account qua each undertaking to be treated as separate unit in sec. 80IC(7) of the Act incorporating the very legislative intent as is there in sec. 80IB(13) Assessee s oil exploration activity cannot be taken manufacture or production as prescribed in sec. 80IC(2)(b) - Hon'ble apex court s landmark judgment in CIT vs. N.C.Budharaja and Co. and Another [ 1993 (9) TMI 6 - SUPREME COURT] held long back that the statutory expression produce has wider connotation than the word manufacture . The former; when used in juxtaposition with the latter, brings into existence new goods by a process which may or may not amount to manufacture. And that the same also includes in all the by products; intermediary or residuary hon'ble Delhi high court s decision in HLS India Ltd. [ 2011 (5) TMI 322 - DELHI HIGH COURT] also holds that whether or not any particular business activity amounts to manufacture or production for the purpose of various incentives schemes under the Act is required to be examined in the light of facts and circumstances in each case. These can be no denial of the fact that crude oil contains hydrocarbons as paraffin, cycloparaffin, napthene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,777, ₹1174,87,15,092/-, ₹1,149,57,71,017/-, ₹1572,02,31,395/-, ₹1626,49,31,357/- and 186,677,04,350/-; assessment year-wise respectively. 3. Learned representative(s) inform us very fairly that the Revenue s four appeal(s) in assessment year(s) 2003-04 to 2006-07 arise against the CIT(A) s common order holding the taxpayer as eligible for sec. 80IB deduction in relation to its profit derives from the eligible undertaking i.e. new oil wells taken on standalone basis. The Assessing Officer s identical four folded reasoning in his separate assessment order(s) declined the same inter alia on the ground that the taxpayer s oil wells in issue were not new industrial undertaking(s) it did not comply with Rule 18BBB(2) of the Income Tax Rules, 1962 requiring a separate report accompanied by the profit and loss account and balance-sheet of the eligible undertaking as if it is a distinct entity, its plant and machinery used in the oil wells had been previously put to use for other purposes and Form 10CCB auditor report had not been field alongwith the return; respectively. All this resulted in disallowance(s) of assessee s above stated corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been submitted for each well alongwith the return of income. the Authorized Representative (AR), Dr. Debi Pal, Sr. Advocate appearing on behalf of the Appellant submitted that under sections 80IB and 80IC where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in Sub-section (2) there shall be in accordance with and subject to the provisions of this section be allowed in computing the total income of the assessee a deduction from such profits and gains as specified in Sub-section (3). In order to claim such benefit the following conditions are to be satisfied:- a) The benefit is available to an undertaking or enterprise; b) Such undertaking or enterprise begins to manufacture or produce any article of thing not being any article or thing specified in respect to the Thirteen Schedule; c) The said section applies if the conditions specified in sub-section (4) of Section 80IC applies. The conditions set out therein includes inter alia that the undertaking or enterprise is not formed by splitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a new undertaking must be an integrated unit by itself wherein articles are produced and at least a minimum of 10 persons, with the aid of power and a minimum 20 persons without the aid of power have been employed. Such a new industrially recongnizable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. The industrial unit and be treated as a new industrial undertaking if the undertaking is new in the sense that the new plant and machinery are erected for producing either the same commodities or some distinct commodities. The Supreme Court further pointed out that in order to claim the benefit of Section 15C of the 1922 Act the following conditions are to be establisheda. Investment of substantial fresh capital in the industrial undertaking set up; b. Employment of requisite labour therein; c. Manufacture or production of articles in the said undertaking; d. Earning of profits clearly attributable to the said new undertaking and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions. The provisions of section 80IC are similar in that the only requirement is that thee profit of the concern or the undertaking is to be separately ascertainable, and therefore the report of the Auditor giving such separate profit ( ascertainable from, each oil well ) is sufficient compliance with the section. The aforesaid decision of the Gauhati High Court is binding upon all authorities within the jurisdiction of the High Court. The same view has been subsequently followed by the Gauhati High Court in the case of Bongaigaon Refinery Petrochemicals Ltd. Vs. CIT reported in 274 ITR 379. This view has been supported in catena of judicial decisions. 104 ITR 101 (Cal) at page 104 120 ITR 110 (Cal) at page 120 190 ITR 553 (All) at pages 555 (C) Regarding the assertions of the AO that the undertaking has been formed by transfer of assets, the AR submitted that the assessee has not transferred any plant or machinery which was formerly used by the assessee. In fact, in each Oil Well, only new plant or machinery has been used and constructed for the purpose of producing the Crud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IC for the assessments years 2005-06 and 2006-07 are to be allowed . 5. Learned senior standing counsel seeks us to treat the Revenue s appeal ITA No.120/Gau/2008 for assessment year 2003-04 as the lead case raising the following substantive grounds:- 1. On the facts and circumstances of the case, the Ld. CIT(A) had erred on facts and law by allowing deduction u/s. 80IB through a non speaking order, without discharging and rebutting the AO s finding on facts and law and without referring to the limitations as provided u/s. 80IB(3)(i), 80IB(4) 3rd proviso of the I.T Act and 80IB(9). 6. Our attention is next invited to Revenue s application filed way-back on 29.03.2017 seeking to raise its twin folded additional grounds that the CIT(A) has further erred in holding the assessee is eligible for u/s 80IB deduction despite its failure in filing the auditor s report in the prescribed Form 10CCB of the IT Rules and also for not having raised the said relief claim in the return of income. Hon'ble apex court s landmark judgment in National Thermal Power Corporation Ltd. vs. CIT (1998) 29 ITR 383 (SC) considered in the trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction as a mandatory condition for furnishing a separate audit report alongwith the relevant profit and loss account as well as balance-sheet as if the undertaking is an distinct entity for the purpose of claiming u/s 80IB deduction. It also emphasises that the impugned statutory provision treats each undertaking as a separate one on standalone basis including capital employed, profits derived to be recorded in separate books of account. Hon'ble jurisdictional high court s decision CIT vs. Technotive Eastern Pvt. Ltd. (2002) 225 ITR 253 (Gau) is sought to be distinguished on the ground that the same involved sec. 80HH and 80I claim(s) against the one u/s 80IB raised before us. 10. The Revenue s next arguments are that the assessee s plant and machinery in its oil wells had been previously used for other purposes and therefore, the Assessing Officer had rightly denied the impugned sec. 80IB deduction. And also that the assessee had neither filed its Form 10CCB auditor s report alongwith return of income nor during scrutiny proceedings. 11. Mr. Mahanta, Principal Commissioner of Income-tax, Dibrugarh has also rendered his v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1977) 107 ITR 182 (Cal); Ranbaxy Laboratories Ltd. vs. Assistant Commissioner of Incometax, Raange-15, New Delhi (2016) 68 taxmann.com 322 (Del); Commissioner of Income-tax vs. G.M.Knitting Industries (P) Ltd. (2015) 376 ITR 456 (SC); Commissioner of Income-tax, Delhi vs. Contimeters Electricals (P) Ltd. (2009) 317 ITR 249 (Del); Commissioner of Income-tax vs. Axis Computers (India) (P) Ltd. (2009) 178 Taxman 143 (Del); Commissioner of Income-tax-I vs. AKS Alloys (P) Ltd. (2012) 18 taxmann.com 25 (Mad); Commissioner of Income-tax vs. Gujarat Oil Allied Industries (1993) 201 ITR 325 (Guj) and Bajaj Tempo Ltd. vs. Commissioner of Income-tax (1992) 196 ITR 188 (SC); ARB Industries vs. JCIT Special Range-14 (2005) 93 TTJ 608 (Del) Notification No.S.O. 627(E) [No.11022(F.No.142/32/99-TPL)]Section 80-IB dated 04.08.1999 and Oil Natural Gas Corporation Ltd. vs. Commissioner of Income-tax (2015) 376 ITR 306 (SC) is also quoted in support. 14. We have given our thoughtful consideration to forgoing arguments qua the instant lead issue of assessee s deduction claim u/s 80IB of the Act. We advert to the Assessing Officer s four folded reasoning (supra) that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identifiable as per their respective production. And also that it had maintained production-wise and drilling cost; well-wise, in separate books of account in computers. We therefore decline the Revenue s twin foregoing arguments. Its reliance on hon'ble Calcutta high court s judgment in assessee s case (supra) treating the oil wells as a composite plant for sec. 32(2A) investment allowance deduction does not apply so far as sec. 80IB deduction claim is concerned. We make it clear that the said relief was applicable for the purpose of giving stimulus to investment whereas the instant issue is that of eligible undertaking-wise deduction as already proved in foregoing discussion. 15. The Revenue s next argument is that the assessee had used its machines or plant for other purposes as per page-6 of the assessment order dated 30.11.2005 also does not carry merit. We notice first of all that the Assessing Officer had nowhere indicated as to what kind of plant and machinery had been used for other purposes. Be that as it may, hon'ble apex court s judgment in Bajaj Tempo Ltd. (supra) held long back that the legislative expression form alongwith a pre-fix n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed. We wish to reiterate here as per page 214 in the paper book that the assessee s Form 10CCB had specifically raised sec. 80IB(4) deduction claim for ten assessment years. Pages 226 is the very Form-10CCB report for assessment year 2004-05 in identical manner. We therefore reject the Revenue s instant grievance which turns out to be against the facts on record. We make it clear that Form 10CCB is a specific document prescribed for claiming the impugned deduction. The Revenue s above stated arguments that the assessee had not expressly made it clear in its computation about the impugned deduction claim raised u/s. 80IB(4) of the Act is declined. 19. Learned standing counsel submitted at this stage that our foregoing detailed discussion holding the assessee s eligible for claiming sec. 80IB deduction is applicable only in assessment years 2003-04 and 2004-05 involving appeal(s) ITA No.120 and 121/Gau/2008. We therefore reject Revenue s instant former two appeals. 20. The Revenue s case at this stage is that the Assessing Officer had rightly declined the assessee s deduction claim u/s. 80IC of the Act. Learned Principal CIT invited our attention t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions Mining projects or like projects occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. Keeping in mind the above provision, we have looked into each of the contracts involved in the present group of cases and find that the brief description of the works covered under each of the said contracts as culled out by the appellants and placed before the Court is correct. The said details are set out below: S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1535 Laboratory testing under simulated reservoir conditions 13 1514 Consultancy for optimal exploitation of hydrocarbon resources 14 2797 Consultancy for all aspects of Coal Bed Methane 15 6174 Analysis of data of wells to prepare a job design. 16 1517 Geological study of the area and analysis of seismic information reports to design 2 dimensional seismic surveys. 17 7226 Opinion on hydrocarbon resources and foreseeable potential 18 7227 Opinion on hydrocarbon resources and foreseeable potential. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of reliability of control systems in the drilling rig. 33 2008 Expert advice on the device to clean insides of a pipeline 34 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations 35 925 Engineering analysis of rig 36 1519 Imparting training on cased hold production long evaluation and analysis 37 1533 Training on well control 38 1518 Training on implementation of six sigma concepts 39 1516 Training on implementation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments made to overseas non-resident entities to be covered under the specific provision u/s 44BB and not in presumptive scheme of taxation u/s 44AD of the Act. We make it clear that the Act nowhere defines minerals or mineral based industry . The same has therefore to be taken as per its meaning in ordinary prudence. Hon'ble apex court s decision in Raghunath Rai Bareza vs. PNB (2007) 135 Companies cases 163 (SC) holds that it is the cardinal principle of interpretation of a statute that the words used by the legislature are to be understood in their natural, ordinary, and popular meaning and to construe as per their grammatical meaning unless such a construction leads to some absurdity or unless there is something in the context or in the object of the statue to suggests to the contrary. Their lordships another judgment in Smt. Tarulata Shyam and Others vs. Commissioner of Income-tax, West Bengal (1977) 108 ITR 345 (SC) also made it clear long back that it is the fundamental rule of taxation that when there is no scope for imparting into the statue words which are not used, such an import would not construe but to amend the statute. And also that if there is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t argument is that assessee s oil exploration activity cannot be taken manufacture or production as prescribed in sec. 80IC(2)(b) of the Act. Hon'ble apex court s landmark judgment in CIT vs. N.C.Budharaja and Co. and Another (1993) 204 ITR 412 (SC) held long back that the statutory expression produce has wider connotation than the word manufacture . The former; when used in juxtaposition with the latter, brings into existence new goods by a process which may or may not amount to manufacture. And that the same also includes in all the by products; intermediary or residuary hon'ble Delhi high court s decision in HLS India Ltd . (supra) also holds that whether or not any particular business activity amounts to manufacture or production for the purpose of various incentives schemes under the Act is required to be examined in the light of facts and circumstances in each case. These can be no denial of the fact that crude oil contains hydrocarbons as paraffin, cycloparaffin, napthene and araomatic comprcands which is obtained from beneath the earth s surface. We reiterate that this assessee admittedly drills / explores crude oil for the purpose of refining the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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