TaxTMI 
TaxTMI 
2005 (1) TMI 326
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....mptive rate of 10% of the total receipts. The assessee was asked to explain as to how the provisions of section 44BB were applicable to the present case. The explanation of the assessee before the Assessing Officer was (i) that the pipelines laid by the assessee was to be used for the purpose of transportation of natural gas which falls within the meaning of 'mineral oil' for the purpose of section 44BB (ii) that GAIL was processing the natural gas to produce LPG, propane, pentane etc. and thus, it was engaged in the business of production of mineral oils. Thus, it was submitted that the assessee was covered by the provisions of section 44BB as it was providing services to GAIL which was engaged in the business of production of mineral oil. The assessee also relied on the definition of natural gas as provided in the Petroleum Tax Guide, 1998 as well as the definition of the word "production" provided in the said guide. Not satisfied with the said explanation of the assessee, the Assessing Officer held that provisions of section 44BB were not applicable to the present case by observing as under: "I am in total disagreement with the assessee's contention that M/s....
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....years 1995-96 and 1996-97. However, the major business of GAIL was that of transportation of natural gas through HBJ pipelines and its subsidiaries. M/s. GAIL was not in the business of exploration or prospecting of natural gas. It was not owning any oil fields or gas fields. This part of the business was, and is still being handled by ONGC. M/s. GAIL was buying its entire stock of natural gas from ONGC and transporting the same through its HBJ pipeline to its various clients who are then using the gas as raw material or as fuel. A very small part of the activities of the GAIL was with regard to the production of LPG. The assessee company was laying GAIL's pipeline under the Chambal and the Yamuna rivers crossings. It may be mentioned that GAIL has no LPG plant after these river crossings. All of GAIL's LPG plants are before the above mentioned river crossing. Hence, it is clear that GAIL is not in the business of prospecting or production of mineral oils. The main business of GAIL is with regard to transportation of natural gas, and it was to facilitate this part of the business of GAIL that the assessee company was providing its services. Keeping in view these facts, it i....
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....) Municipal Corpn. of Greater Bombay v. Bharat Petroleum Corpn. Ltd. AIR 2002 SC 1638. In addition to above judgments, he also relied on the Tribunal decision and the case of Mc. Dermott International Inc. v. Dy. CIT [1994] 49 ITD 590 (Delhi). 2. That the word "production" used in section 44BB should be given its full play since it is of widest amplitude. Since 'Natural Gas' has been included in definition of 'Mineral Oils' as per the Explanation to section 44BB, production of LPG, propane, butane, pentane, CNG and SBP by GAIL would also fall within the ambit of the words "production of mineral oils" and consequently, the activities of assessee laying down the pipelines along the Yamuna and Chambal rivers would be covered by the provisions of section 44BB. 3. That the lower authorities virtually have rewritten the section 44BB by holding that it is intended only for the foreign companies engaged in the basic business of extraction and production of mineral oils. Such an interpretation is ex facie erroneous and renders redundant the distinct expressions 'services', 'facilities' and 'in connection with' and the phrase....
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...., the learned Sr. DR has supported the order of CIT (A) by reiterating the reasonings given by Assessing Officer and CIT(A). We have already reproduced the reasonings given by Assessing Officer in earlier part of our order and, therefore, the same need not be repeated. 7. Rival submissions have been considered carefully in the light of case law referred to and the relevant material placed before us. The question for our consideration is whether the provisions of section 44BB can be applied to the facts of present case. Therefore, it would be appropriate to reproduce the relevant portion of the said provision: "Section 44BB: (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits a....
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....ion 44BB is of widest amplitude and, therefore, would include the process carried out by GAIL and the scope of the word 'production' cannot be restricted to production of natural gas at well heads i.e. producing natural gas from the bowels of earth. On the other hand, the stand of the revenue has been that production of LPG, Propane, Butane, etc. does not amount to production of natural gas as the process of production had already been completed prior to the purchase of natural gas by GAIL from ONGC. 12. After giving our due consideration to this issue, we are unable to accept the contentions of the learned Sr. Counsel for assessee. He has not been able to demonstrate that LPG, Propane or Butane amounts to natural gas. On the other hand, our study shows that these items cannot be considered as natural gas. 'Natural Gas' is not defined in the Income-tax Act, 1961. As per Petroleum Tax Guide, 1998, relied upon by the assessee, it means as under: "'Natural Gas' means wet gas, dry gas, all other gaseous hydrocarbons and all substances contained therein, including sulphur, carbon dioxide, nitrogen but excluding helium, which are produced from oil and ....
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....n organic synthesis, esp. of synthetic rubber." As per I.S.O. 6678: 1991(E) - "LPG means liquids composed predominantly of any of the following hydrocarbons or mixture thereof: Propane, Propene, butane". As per Internet IOCL website, LPG is defined as under:- "'LPG' is a mixture of hydrocarbons, which are in gaseous state at ambient temperature and pressure but these are liquefied under pressure for easy storage, handline and transportation in pressurized vessels. It is obtained through Crude Oil refining or from Natural Gas through fractionation. Butane and Propane are the main constituent hydrocarbons in LPG. Others present in traces or small fractions are Iso-butane, butylenes, n-butane, propylene etc." As per ISO 6678: 1991(E): "'LPG' means liquids composed predominantly of any of the following hydrocarbons or mixture thereof: propane, propane, butanes and butene." As per Clause (i) of section 2 of the Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2000, LPG is defined as: "a mixture of light hydrocarbons which may include propane, isobutane, normal butane, butylenes etc., which are gaseous at normal....
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.... inflammable and lighter than air. It is not a liquid fuel, and is not the same as LPG (Liquefied Petroleum Gas) which consists of propane and butane in liquid form." From the above definition, it is clear that when natural gas is compressed to a particular pressure for storing, it is considered as CNG. Admittedly, GAIL does not have any gas well. It simply purchases natural gas which, perhaps, can be said to be compressed by it. The question, therefore, would be whether such process amounts of production. 15. The word 'production' has been defined as an act of producing. In Webster's Encyclopaedic Unabridged Dictionary (New Revised Edition), the word 'produce' has been defined as under: "1. To bring into existence; give rise to; cause: To produce steam; to produce a reaction. 2. To bring into existence by intellectual or creative ability: To produce a novel; to produce a great painting. 3. To create (something having exchange value): to produce goods for sale. 4. To bring forth; give birth to; bear: to produce a litter of puppies. 5. To provide, furnish or supply; yield; 'a mine producing silver. 6....
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....ng the crude oil by removing the impurities through the solvent refinery plant. The question arose whether any process of manufacture was involved. The apex court held that no manufacturing process was involved in the process of refining. Their Lordships held as under: "Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new different article must emerge having a distinctive character, name and use". Similar observations were made by their Lordships of Hon'ble Supreme Court in the case of Tungbhadra Industries v. CTO [1960] 11 STC 827. For the benefit of this order, the same are being reproduced as under:- "When raw groundnut oil is converted into refined oil, there is no doubt processing, but this consists merely in removing from raw groundnut oil that constitute part of the raw oil which is not really oil. The elements removed in the refining process consists of free fatty acids, phospoticides and unsaponfiable matter. After the removal of this non-oleic matter thereafter the oil continue....
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....with the same since such contention was argued at a great length. There cannot be any dispute to the legal position canvassed by him that Noscitur a sociis is merely a rule of interpretation and the same cannot be applied where language used by the Legislature is plan and unambiguous. Where language is clear and unambiguous, nothing can be added to or taken away from a statute unless intention of the Legislature appears to be different. On the other hand, it is also the settled legal position that words in a section are not to be interpreted by having those words on one hand and dictionary meaning on the other. In spelling out the meaning of words in a section, one must take into consideration the context in which such words are used - Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd. AIR 1987 SC 1023. The words 'production of in section 44BB are qualified by the words "Mineral oils" which, as per Explanation, includes Petroleum & Natural Gas. This, itself shows that contextual meaning has to be given to word 'production' as appearing in section 44BB. 23. Even otherwise, applying the plain and natural meaning of the word production, we do not fi....