2014 (3) TMI 588 - HC - Income Tax

Court rules in favor of petitioner as industrial undertaking engaged in mining under Income Tax Act.

M/s. Dewan Chand Ram Chandra Industries P. Ltd. Versus Union of India

M/s. Dewan Chand Ram Chandra Industries P. Ltd. Versus Union of India - [2014] 364 ITR 70 (Del) Issues Involved:1. Whether the petitioner qualifies as an 'industrial undertaking' engaged in mining under Section 10(15)(iv)(c) of the Income Tax Act, 1961.2. Interpretation of the term 'engaged in mining' for the purpose of tax exemption.3. Relief sought by the petitioner regarding tax deducted at source (TDS).Issue-wise Detailed Analysis:1. Whether the petitioner qualifies as an 'industrial undertaking' engaged in mining under Section 10(15)(iv)(c) of the Income Tax Act, 1961:The petitioner, a company with limited liability, entered into contracts with ONGC for deploying work over rigs and auxiliary operation services in oil fields. To finance the purchase of these rigs, the petitioner obtained a foreign currency loan and a rupee loan from State Bank of India, Singapore. The petitioner sought exemption under Section 10(15)(iv)(c) of the Income Tax Act, which exempts interest payable by an industrial undertaking in India on money borrowed in a foreign country for the purchase of capital plant and machinery. The Central Board of Direct Taxes (CBDT) initially rejected the application, stating that the petitioner was not an industrial undertaking engaged in manufacturing or processing of goods but was merely supplying equipment for the manufacturing process.2. Interpretation of the term 'engaged in mining' for the purpose of tax exemption:The court examined whether the petitioner was 'engaged in mining' as per the Explanation to Section 10(15)(iv)(c). The term 'mining' in common parlance means extracting ores, oil, and other minerals from the earth. The court referred to various legal dictionaries and precedents to interpret the term 'engaged.' It concluded that 'engaged in mining' should include activities that are integral and directly related to mining, even if the undertaking does not itself extract minerals. The court emphasized the need for a broad interpretation to further the legislative intent behind the tax exemption provision. The petitioner's activities, such as repairing oil wells and enhancing production, were considered integral to mining operations, thus qualifying the petitioner as an industrial undertaking engaged in mining.3. Relief sought by the petitioner regarding tax deducted at source (TDS):The petitioner had already paid TDS on interest payments to State Bank of India, Singapore, amounting to Rs. 7,56,086/-. The court noted that no certificate for tax deducted in Form 16A was issued to the bank. An interim order had been passed earlier, allowing the petitioner not to deduct TDS on further payments. The court directed the respondents to verify the assessments made in the case of State Bank of India, Singapore, and if the bank had not taken credit of the tax paid at source, the amount should be refunded to the petitioner with interest at 8% per annum from the date of filing the writ petition till payment. The court allowed the writ petition, ruling that TDS would not be deductible on further payments.Conclusion:The court concluded that the petitioner qualifies as an industrial undertaking engaged in mining under Section 10(15)(iv)(c) of the Income Tax Act, 1961. The petitioner's activities were integral to mining, warranting a broad interpretation of the term 'engaged in mining.' The court granted relief to the petitioner regarding the refund of TDS with interest and ruled that no further TDS would be deductible. The writ petition was accordingly disposed of with no costs.