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TMI Blog2021 (11) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. First we take appeal of the assessee bearing ITA No.2388/Ahd/2015 for A.Y. 2004-05 for the purpose of adjudication. The assessee has raised the following grounds of appeal: Your Appellant being dissatisfied with the order passed by the Commissioner of Income Tax (Appeals)-13, Ahmedabad, (hereinafter referred to as CIT(A) u/s 250 of the Income Tax Act ("'the Act"), presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other. 1. The order passed by the learned CIT(A) upholding the reassessment is bad in law and requires to be quashed. It is submitted that it be so held now. 2. The learned CIT(A) erred in upholding the reassessment on the ground that Assessing Officer has omitted to enquire on deduction u/s. 42 when in-fact the reopening is based on change of opinion which is not permissible under she Income tax law. It is submitted it be so held now. 3. The learned CI1(A) has erred in holding oil well as part of the building within the extended meaning of the term building given in the Appendix 1 to the Income Tax Rules and hence confirming the depreciation allowance at 10% instead of 80% as per Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 9th May 2006 issued under section 142(1) of the Act with respect to the deduction claimed by it (the assessee) under section 42 of the Act. In response to such notice it has made a reply dated 26th of September 2006 justifying its claim for the deduction under section 42 of the Act. 4.4 In view of the above the assessee contended that the AO during the assessment proceedings under section 143(3) of the Act has formed opinion with respect to the deduction claimed by the assessee under section 42 of the Act which was subsequently allowed. Thus, the initiation of the proceedings under section 148 of the Act is based on the change of opinion which is not permitted under the provisions of law. 4.5 However, the AO rejected the contention of the assessee by observing that it is one of the prerequisite for claiming the deduction under section 42 of the Act that there has to be necessary clauses in the agreement allowing the deduction under section 42 of the Act. Nevertheless, the AO in the case on hand without examining the necessary details has allowed the deduction to the assessee under the provisions of section 42 of the Act. Thus, once primary document has not been examined by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under section 143(3) of the Act has formed the opinion with respect to the deduction claimed under section 42 of the Act. Accordingly, it was contended by the assessee that initiation of present proceedings under section 147 of the Act is based on the change of opinion which is unwarranted under the provisions of law. 8. On the contrary, the learned DR contended that the production sharing contract between the assessee and the Government of India which is the basis for allowing the deduction under section 42 of the Act was not available before the AO during the assessment proceedings. As per the learned DR the production sharing contract was the basis of deciding the issue for allowing or disallowing the deduction under section 42 of the Act. Thus in the absence of such document, there remains no ambiguity that no opinion has been formed by the then AO in the assessment framed under section 143(3) of the Act. The learned DR in support of his contention relied on the judgment of Hon'ble Delhi High Court in case of CIT vs. Usha International Ltd. reported 25 taxmann.com 200, Hon'ble Bombay High Court in case of Export Credit Guarantee Corporation of India Ltd. vs. ACIT reported 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e' attached with your ROI. Please justify your claim of deduction u/s.42 and explain how it is admissible. 9.3 The above queries were answered by the assessee in the manner as detailed below: During- the year under consideration we have spent Rs. 4,24,67,907 on the exploration activities and the same was claimed as deduction in the return of income filed in accordance with provisions of Section 42 of the Income Tax Act,, 1961. A specific note was appended to (he return of income. The same is reproduced hereunder for your goodself's ready reference: "3. stated above assessee company is extracting oil as per the agreement ''with Central Government and therefore, entitled for deduction under section 42 of the Income Tax Act and the same is claimed as deduction . No depreciation has been claimed in respect of such expenditure." XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Thus, as shown above in view of the provisions of Section 42{1)(b) of the Income Tax Act, 1961 any capital expenditure incurred for the exploration activities are admissible as deduction. We are enclosing herewith the details of the expenditure incurred marked as ANNEXURE - A. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be any difference whether the proceedings were initiated within 4 years or beyond the 4 years as far as change of opinion is concerned. 9.6 On perusal of the assessment order framed under section 143(3) of the Act, it is not discernible whether AO has applied his mind with respect to the deduction claimed by the assessee under the provisions of section 42 of the Act. The order of the AO under section 143(3) of the Act silent on this aspect. Thus the question arises whether the AO has formed any opinion during the assessment proceedings with respect to the deduction claimed by the assessee under section 42 of the Act. In this regard we note that is not necessary for the AO to record his finding in his assessment order with respect to the matters where he was satisfied after necessary verification that no addition/disallowances is warranted. 9.7 It is also pertinent to note that the authorities below and the learned DR has made references to various judicial precedents in support of the contention that there was no opinion formed by the AO during the assessment proceedings with respect to the deduction claimed by the assessee under the provisions of section 42 of the Act. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 9.10 As the preliminary issue has been decided in favour of the assessee by quashing the proceedings initiated under section 147 of the Act, we are not inclined to decide the issues on merit. As such, the issues raised on merit become infructuous. Thus the grounds of appeal of the assessee are dismissed. 9.11 In the result appeal of the assessee is partly allowed. Coming to the ITA No. 2298AHD/2015 of Revenue pertaining to AY 2006- 07 10. The Revenue has raised following grounds of appeal 1) The Id. CIT(A) has erred in law and on facts of the case in directing the Assessing Officer to allow the deduction u/s.80IB(9) of the Act as claimed by the Assessee and to compute the deduction u/s.80IB(9) of the Act on the income of "each well/cluster of wells" considering as separate undertakings, without appreciating the fact that the entire Development Contract Area allotted under a single Production Sharing Contract for exploration, discovery and commercial production constitutes one undertaking. 2) On the facts and in the circumstances of the case, the Id.CIT(A) ought to have upheld the order of the Assessing Officer. 3) It is therefore prayed that the order of the CIT(A) be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings. 12.4 In view of the above, the AO held that the assessee is not an industrial undertaking which is eligible for deduction under section 80IB(9) of the Act. Accordingly, the AO disallowed the claim of the assessee. 13. Aggrieved assessee filed an appeal before the Learned CIT (A) who allowed the appeal of the assessee. 14. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 15. The learned DR before us vehemently supported the order of the AO. 16. On the contrary, the learned AR before us vehemently supported the order of the ld. CIT-A. 17. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 3988/AHD/2008 for the Assessment Year 2005-06 vide order dated 31st December 2019, involving identical issue has decided the matter in favor of the assessee for statistical purposes. The relevant extract of the order is reproduced as under: 16. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute regarding the facts of the case whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration contracts for Coal Bed Methane blocks and begins commercial production of natural gas on or after the 1st day of April, 2009. Explanation.-For the purposes of claiming deduction under this sub-section, all blocks licensed under a single contract, which has been awarded under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th February, 1999 or has been awarded in pursuance of any law for the time being in force or has been awarded by Central or a State Government in any other manner, shall be treated as a single "undertaking". ] 16.2 From the plain reading of the above provision, we hold that the assessee is entitled for the deduction under section 80 IB(9) of the Act for the exploration of natural gas by the amended provisions as discussed above. But such amendment was brought under the statute by the Finance (No. 2) Act 2009 w.e.f. 1-4-2010 whereas the year under consideration before us pertains to the AY 2005-06. Thus the question arises whether such amendment is retrospectively applicable. The answer stands in favour of the assessee in view the judgment of Hon'ble Gujarat High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or made "small repair" in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT, therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. We have no hesitation to hold that the Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down." Before parting, it is very pertinent to note that the above findings in question Nos. 1 to 3 of the Hon'ble Gujarat High Court in the case of Niko Resources Ltd. has been stayed by the Hon'ble Supreme Court while admitting the SLP in (CC) No. 18370 of 2015. The relevant extract of the order is reproduced as under: "As we are entertaining the matter, the High Court(s) where the appeals are pending shall not finalise the same till the matter is dealt with by this court." 17.3. In view of the above, we hold that the questions as discussed above are pending adjudication before the Hon'ble Apex Court. Accordingly, we refrain ourselves from adjudicating the same. However, we set aside the impugned issue to the file of the AO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law & facts of the case and therefore needs to be suitably modified. It is submitted that it be so held now. 2. The Learned CIT(A) has erred in holding oil well as part of the building within the extended meaning of the term building given in the Appendix 1 to the Income Tax Rules and hence confirming the depreciation allowance at 10% instead of 60% as per Entry III(8)(xii) of Appendix I to the Income Tax Rules 1962 on Oil wells used as Plant & machinery in the field operations. It is submitted that it be so held now. 3. While upholding the disallowance u/s 42 the learned CIT(A) has erred, in not directing the AO to grant depreciation at 60% on the oil field equipment's / plants included in the claim under section 42 and entitled to deprecation per Entry III(8)(xii) of Appendix I to the Income Tax Rules, 1962 together with additional depreciation u/s 32(l)(iia) of the Act. It is submitted that it be so held now. 3. The learned Commissioner of Income Tax (Appeals) erred in holding that interest under section 234B was mandatorily and consequential. It is submitted that it is to be held now. Your appellant prays for leave to add to alter and/or to amend any of the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery for drilling of oil is not possible. In that view of the matter, the view taken by CIT (Appeals) is restored and the findings of the Tribunal are reversed. Hence, the issue raised in this Appeal is answered in favour of the assessee and against the Department. The Appeal stands disposed of accordingly. 23.1. As the facts in the case on hand and the facts of the case as discussed in the case of Niko Resources Ltd (supra) are identical, therefore, respectfully following the order of the jurisdictional High Court as discussed above, we hold that the oil well is part of the plant and machinery. Hence, the ground of appeal raised by the assessee is allowed. 26.1 The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT, as discussed above, suggesting that there was the change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we set aside the order of the ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly we direct the AO to delete the addition made by him. Hence the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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