TMI Blog2015 (12) TMI 1868X X X X Extracts X X X X X X X X Extracts X X X X ..... uch interest income was held to be assessable as business income. There are various decisions in an identical situation but the fact of each case has to be kept in juxtaposition before taking any decision. Interest of income on the funds placed with banks - As assessee had neither started commercial production nor even trial production during the year under consideration and the funds were kept in banks from which interest was earned. In such a situation, it can be said that interest income was earned prior to starting of business, therefore, it cannot be said to be business income of the assessee and has to be assessed as income from other sources. Funds were available with the assessee before the same are invested in actual business activity, therefore, it can be concluded that such interest income is not incidental to the business activity of the assessee. There is further finding in the impugned order that in the present case the source of funds on which the interest was earned were not the business funds. It is not the case that business funds were kept in bank for a short duration before starting the business. The expression derived from is narrower in scope than the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement. If the provision of the Act is analysed that it can be concluded that the production sharing contract is an independent accounting regime which includes tax treatment of cost, expenses, income, profit etc. it prescribes separate rule of accounting as it is a complete code by itself. Reference may be made to Joshi Technologies International Inc. Vs. Union of India [ 2013 (7) TMI 809 - DELHI HIGH COURT] - The additional benefits, apart from the normal allowance, admissible under other provisions of the Act is to be allowed as a deduction in computing the business profit of the assessee provided such allowances are specified in the agreement of the assessee entered into with the Central Government etc. and then the allowance shall be computed in the manner specified in the agreement. In the present appeal, neither such agreement was discussed before us nor there is a finding in the impugned finding, therefore, we set aside this issue to the file of the Ld. DRP to examine the facts and then decide the issue in accordance with law, therefore, this ground is allowed for statistical purposes. The assessee be given opportunity of being heard. Claim of depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order. 3. We have considered the rival submissions and perused the material available on record. the facts in brief are that the assessee company was incorporated in Caymen Island, having its registered office at Century Yard. The assessee declared nil income in its electronically filed return on 31.10.2007. The case of the assessee was selected for scrutiny, therefore, requisite notices were issued to the assessee. The assessee with 10% participating interest and in joint venture partners with Reliance Industries ltd, with 90% participating interest, entered into a production sharing contract with Govt. of India on 12th April 2000 for a period of 25 years for exploration and development of oil and Gas field with respect to contract area identified block NEC-OSN-97/2 (popularly known as NEC 25) or ( NEC-25-PSC ). The accounts of the assessee are audited and the audit report was filed during assessment proceedings. In its audit report, the auditor mentioned that the company is Non-Operator of the field while RIL has been designated as operator. The company has set up a project office in India from April 2006 under intimation to RBI and has obtained necessary approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was held to be assessable as business income. There are various decisions in an identical situation but the fact of each case has to be kept in juxtaposition before taking any decision. (a). So far as interest of income of Rs. 545,702/- on the funds placed with banks are concerned, there is a factual finding in para 7 of the impugned order that the assessee had neither started commercial production nor even trial production during the year under consideration and the funds were kept in banks from which interest was earned. In such a situation, it can be said that interest income was earned prior to starting of business, therefore, it cannot be said to be business income of the assessee and has to be assessed as income from other sources. Funds were available with the assessee before the same are invested in actual business activity, therefore, it can be concluded that such interest income is not incidental to the business activity of the assessee. There is further finding in the impugned order that in the present case the source of funds on which the interest was earned were not the business funds. It is not the case that business funds were kept in bank for a short duration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee-company had not commenced and, therefore, the Apex Court held that there could be no income from business. Thus, assessee will not be able to take benefit of this judgment. Similarly, the other cases relied upon by the assessee are also distinguishable on facts of this case, consequently, on this count, we affirm the stand of the Ld. DRP. (b). Now we shall take up the payment of foreign exchange gain of Rs. 28,33,263/-. We note that the assessee incurred expenditure of Rs. 180,799,709 during the relevant year for various activities connected with exploration and development of oil fields. Such expenditure was claimed as deduction u/s 42 of the Act in the year in which commercial production commenced. The assessee reduced the foreign exchange gain of Rs. 28,33,263/- from the expenditure and the net amount was claimed u/s 42 of the Act in the year of start of commercial production. The assessee relied upon the decision in CIT Vs. Enron Oil Gas India Ltd. 305 ITR 75 and CIT Vs. Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC). We note that the expenditure has not been claimed as deduction during the year by the assessee. We find that in the aforementioned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance shall be computed in the manner specified in the agreement. In the present appeal, neither such agreement was discussed before us nor there is a finding in the impugned finding, therefore, we set aside this issue to the file of the Ld. DRP to examine the facts and then decide the issue in accordance with law, therefore, this ground is allowed for statistical purposes. The assessee be given opportunity of being heard. (c) Now we shall deal with the claim of depreciation with respect to assets such as office equipment fixture and furniture etc used at the project office of the assessee. There is a finding in this impugned order that drilling activities has been started thus the claim of depreciation is a statutory allowance, it has to be allowed more specifically when the assessee is the owner of the asset which was used for business purposes. Since the asset was put to use and owned by the assessee, the depreciation has to be allowed. 5. Finally, this appeal of the assessee is partly allowed for statistical purposes. 6. Now, we shall take up ITA No. 6493/Mum/2013, wherein first ground pertains to treating the income of Rs 1,11,89,253/- earned as interest income f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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