TaxTMI 
TaxTMI 
2013 (9) TMI 758
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.... nature. 2.1 Grounds not pressed : Ground Nos. 7 to 18 pertaining to quantum of deduction under section 80IB(9) are not pressed. Likewise Ground Nos. 21 and 22 on the disallowance of loss on sale of investments were also not pressed. Accordingly, they are treated as withdrawn. 2.2 Ground Nos. 2 to 6 pertain to the issue of disallowance under section 80IB(9). The assessee company is an oil exploring company extracting oil from P.Y3 Block Field In the Cauvery Oil shore area and Asjol Oilfield in Gujarat. The assessee claimed deduction u/s 80IB on the profit arising from the sale of the oil. The Assessing Officer doubted whether deduction u/s 8OlB is allowable for extracting of oil. The Assessing Officer noted that the crude oil extracted by the assessee from these fields is sold to M/s Chennai Petroleum Corporation Ltd and Indian Oil Corporation Ltd. The Assessing Officer raised a question whether extraction of oil tantamount to manufacture or production of mineral oil or not. 2.3 After considering the dictionary meaning of word " extraction' means 'removal' 'withdrawal' talking out', pulling out' 'origin' and mining, the Assessing Officer prima facie found that the literal ....
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.... combination. Though, the Assessing Officer has also denied deduction for want of 1OCCB report as it was not filed at the time of submission of the return; but, since the CIT(A) has decided the issue of filing of 1OCCB report subsequent to the filing of the return in favour of the assessee and the revenue is not in appeal before us; therefore, the said issue attain the finality at the stage of CIT(A) order. The CIT(A) confirmed the action of the Assessing Officer on similar lines and mainly on the ground that what is extracted and transported by the assessee is nothing but crude oil which remains as it is without undergo any change or any process. The CIT(A) was of the view that some distillation process would not render the product different than the one extracted i.e. the crude oil itself. 8.1 It Is to be noted that the term used In section 801B(9) is production and more specific, the production of mineral oil and not the mineral. Therefore, the Issue is related with the 'production' and not 'mineral'. It is settled proposition of law as laid down by the Hon'ble Supreme Court that the word production as used in sec. 801B of the I T Act has a wider connotation as compared to th....
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....ssessee that when the assessee was allowed deduction u/s 35E for production of mineral oil cannot be denied u/s 8018. Deduction u/ 35E would not conclusively prove that the assessee has carried out the activity of production of mineral oil because as per sec 35E (1), a deduction of expenditure is allowed where an assessee Is engaged In any operations relating to prospecting for, or extraction or production of any mineral. Thus, deduction u/s 35E is allowable, if the assessee is engaged in any of the activity relating to prospecting for or extraction or production and therefore, if a deduction u/s 35E is allowed, that would not establish that the assessee has carried out the production of mineral oil. This aspect will not help the assessee's claim. 10 The definition of mineral oil has not been given in sec. 8018; however. u/s.42 where the deduction in case of business for prospecting etc.. for mineral oil the terms 'mineral oil' has been explained in the Explanation as under: [Explanation.--For the purposes of this section, "mineral oil" Includes petroleum and natural gas.] We further note that u/s 293A, the meaning of mineral oil has been given as under: "Mineral oil' i....
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....d from any angle, we are of the view that the benefit of sec 32A Is available to the respondent assessee The correct legal position regarding deduction of Investment allowance should not be left In doubt and an uncertainty created In the mind of the respondent assessee which is a public sector undertaking In the guise of raising a question as to interpretation of a provision which admits of no doubt. We, therefore, decline reference on the second question." 12.1 Therefore, meaning for the definition given in Explanation to sec. 42, section. 293A as well as In various clauses of Production Sharing Contract ft does not require to undergo any process of any physical or composition change but after the process of separation of gas, water and other sedimentary elements become commercial commodity. Therefore, commercial production of mineral oil as per. sec. 8OIB(9) Involves the activity of extracting Oil from underneath of surface and transport it for sale and nothing else. 12.2 Even otherwise, as per Production Sharing Contract, the assessee and other joint ventures have to explore, develop, extract and deliver the crude oil. This process includes distillation and separation of v....
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....was commenced prior to April 1998 therefore, the deduction u/s.80IB Is not allowable in respect of the sale of oil from AsjoI oil field. 16 We have considered the rival contention and other relevant material on records produced before us in respect of our query. The assessee has not disputed the fact that commercial production from AsjoI oil field was commenced prior to April 1997 but has submitted that no such claim u/s 801B has been in respect of the sale of oil from Asjol oil field. 16.1 From the records available before us, it is not possible to ascertain the turnover and income of sale of oil from AsjoI oil field. Therefore, It is not clear whether the deduction claimed by the assessee for the year under consideration also includes he sale of oil from Asjol oil field. 16.2 Even otherwise, there is a discrepancy In the amount of deduction mentioned in the assessment order viz-a-vis the amount mentioned in the tax audit report. This aspect is required to be verified. 17. In view of the above discussion, the Issue is remanded back to the records of the Assessing Officer for the limited purpose to verify whether the claim of deduction u/s 8OlB also includes the turn ov....
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....to the AO to considering disallowance keeping in mind the principles laid down by the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd., 328 ITR 81(Bom). Accordingly the AO is directed to determine reasonable amount for disallowance under section 14A, as Rule 8D is not applicable for the impugned assessment year. The matter is restored to the file of AO. Grounds considered allowed. 10. Ground No.19 and 20: These grounds are on the disallowance of loss due to cyclone. It was contended that the ld. CIT(A) has not adjudicated the loss claimed by the assessee. He merely settled the year in which tax incidence arises by virtue of his decision in the earlier year. Briefly stated, the facts are that the assessee claimed short term capital loss of Rs.10,58,70,627/- in the computation of total income for the year. It was mentioned that short term capital loss was difference between cost of acquisition of well which was lost in a cyclone and insurance claim received . In the insurance claim assessee claimed total cost of PD-3 well at Rs.17,03,82,590/-. As the well was lost in cyclone, Assessee made insurance claim in assessment year 2004-05 which was brought to....
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...., therefore, corresponding deduction under section 33ABA has to be allowed. Ld. CIT(A) in his order however rejected the claim that the assessee merely raised this ground, without proving that all conditions laid down have been fulfilled. 13. We are unable to understand the reasoning of the ld. CIT(A). The AO himself allowed the deduction on being satisfied about fulfillment of the conditions on the assessee's returned income, whereas that returned income has varied in the course of assessment. It was submitted that the assessee has furnished the necessary report of the auditor and referred to page-6 of the paper book to submit that the assessee has invested to the extent of Rs.1143 million. Therefore, it is eligible for deduction on the assessed income. Since this aspect was not noticed by the Ld. CIT(A) correctly and AO also after making additions to the income from business did not revise the claim, we direct the AO to examine the issue and whatever profits are determined, deduction under section 33ABA has to be allowed as per the provisions i.e. sum equal to 20% of the profits of such business or some equal to amount that was deposited as per provisions, which ever is less. ....