TaxTMI 
TaxTMI 
2018 (11) TMI 1319
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of convenience, these appeals are being disposed off by way of this consolidated order. ITA no.942/Mum./2015 Assessee's Appeal - A.Y. 1996-97 3. Grounds no.1 and 3 are not pressed, hence, dismissed. 4. In ground no.2,the assessee has challenged disallowance of exploration expenses of Rs. 1,90,63,501, pertaining to Pranhita Godavari (PG) Block. 5. Brief facts are, the assessee is a company engaged in the business of exploration and extraction of crude oil and gas. The assessee was awarded a contract for exploration of oil and natural gas in PG Block by the Government of India, Ministry of Petroleum andOil and Natural Gas Corporation Ltd. and the assessee's share in the said block is to the extent of 75%. In the return of income filed for the impugned assessment year, the assessee claimed deduction of Rs. 1,90,63,501, towards exploration expenses of PG Block in terms of Article-16 of Product Sharing Contract (PSC) r/w section 42(1)(a) of the Income Tax Act, 1961 (for short "the Act"). The Assessing Officer while completing the assessment under section 143(3) of the Act disallowed the exploration expenses claimed by the assessee which was confirmed by the learned Commiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....made by the Assessing Officer and sustained by the learned Commissioner (Appeals) submitted, various documentary evidences were submitted before the Departmental Authorities to prove that in the relevant previous year, assessee had surrendered / relinquished 7,300 sq.km. area in PG Block. In this context, he drew our attention to the letter dated 26th December 1995 written to the Ministry of Petroleum and Natural Gas offering to relinquish 7,300 sq.kms. of area in PG Block. He submitted, the Ministry vide letter dated 22nd March 1996, accepted the relinquishment / surrender of 7,300 sq.kms. of area in PG Block. In this context, he drew our attention to the said letter of the Ministry of Petroleum and Natural Gas placed at Page-137 of the paper book. Thus, he submitted, the relinquishment / surrender of a part of PG Block actually happened in the previous year relevant to the assessment year under dispute. Therefore, he submitted, the Department's claim that the assessee has not relinquished / surrendered a part of the PG Block is without any basis. The learned Authorised Representative submitted, as for clause-16 of the PSC r/w section 42(1)(a) of the Act, the assessee is entitl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsuccessful oil exploration expenses is allowable under section 42(1)(a) of the Act. The Co-ordinate Bench of the Tribunal, Mumbai Benches, has also expressed similar view while deciding identical issue in assessee's own case in assessment year 2008-09 in ITA no.4042 and 3489/Mum./2012, dated 19th February 2016. In view of the above, we delete the disallowance made by the Assessing Officer and sustained by the learned Commissioner (Appeals). Grounds raised are allowed. 9. In ground no.4, the assessee has challenged disallowance of set-off of exploration expenses against interest income of Rs. 20,060. 10. The learned Authorised Representative fairly submitted that the issue has to be decided against the assessee. In view of the aforesaid submissions made by the learned Authorised Representative, we dismiss the ground raised by the assessee. 11. In ground no.5, the assessee has challenged short credit of TDS. 12. The learned Authorised Representative submitted, while the assessee has claimed credit for TDS amounting to Rs. 1,22,24,341, the Assessing Officer has given credit for Rs. 1,14,85,146. Thus, he submitted, the Assessing Officer may be directed to grant actual c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so in the original return of income. Thus, he submitted, the reasoning of the Departmental Authorities in rejecting the revised return of income filed by the assessee is against the mandate of law. In support of such contention, he relied upon the following decisions:- i) Dhampur Sugar Mills Ltd. v/s CIT, [1972] 90 ITR 236 (All.); ii) CIT v/s Himgiri Foods Ltd., [2011] 333 ITR 508 (Guj.); iii) CIT v/s Gold Tex Furnishing Industries, [2002] 276 ITR 164 (Del.); iv) CIT v/s P.R. Prabhakar, [2004] 276 ITR 176; v) Goetz India Ltd. v/s CIT, [2006] 284 ITR 323 (SC); and vi) CIT v/s Pruthvi Brokers And Shareholders Pvt. Ltd. [2012] 349 ITR 336 (Bom.). 22. Thus, the learned Authorised Representative submitted, the Assessing Officer may be directed to consider the revised return of income filed by the assessee and decide the claim made in the revised return of income. 23. The learned Departmental Representative, though, relied upon the observations of the Departmental Authorities, however, he submitted that the Assessing Officer may be directed to consider the revised return of income filed by the assessee on merit. 24. We have c....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., in respect of Pranhita Godavari (PG) Block. 28. This ground is identical to ground no.2, of ITA no.942/Mum./ 2015. Following our decision therein, we allow assessee's claim. This ground is allowed. 29. In ground no.3, assessee has challenged disallowance of Rs. 7,39,985 under section 14A of the Act. 30. Briefly the facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee in the relevant previous year has received exempt income by way of dividend amounting to Rs. 15.12 lakh and interest on tax free bonds amounting to Rs. 34,21,233, called upon the assessee to explain why disallowance under section 14A of the Act should not be made. Though, the assessee objected to the proposed disallowance, however, the Assessing Officer rejecting the claim of the assessee disallowed an amount of Rs. 7,39,985 under section 14A of the Act. Being aggrieved of such disallowance assessee preferred appeal before the first appellate authority. However, the learned Commissioner (Appeals) upheld the disallowance made by the Assessing Officer on the reasoning that the assessee has utilised borrowed funds for earning dividend income. Hence, he upheld the disall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6,73,991 pertaining to the preceding assessment year i.e., A.Y. 1997-98. Therefore, after excluding the aforesaid two amounts, since, they did not pertain to the impugned assessment year, the Assessing Officer allowed expenditure to the tune of Rs. 6,81,61,527. Being aggrieved of part disallowance of the expenditure claimed, the assessee preferred appeal before the first appellate authority. 37. After considering the submissions of the assessee, the learned Commissioner (Appeals) found that, though, the expenditure of Rs. 86,73,991, pertained to assessment year 1997-98, however, the block in respect of which such expenditure was incurred was surrendered in the impugned assessment year. Noticing that the Assessing Officer has accepted in principle that unsuccessful exploration expenses are to be allowed in the year of surrender of the block, the learned Commissioner (Appeals) allowed assessee's claim. 38. The learned Departmental Representative submitted, the assessee has not claimed the aforesaid expenditure in the original return of income. He submitted, such expenditure was claimed in the revised return of income. He submitted, allowance of such expenditure claimed in the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....54,60,518, claimed for PY-3 Block an amount of Rs. 41,93,35,902, represent drilling expenses whereas an amount of Rs. 4,28,81,399, represent non-drilling revenue expenditure. He further observed that an amount of Rs. 6,38,95,332, represents non-drilling capital expenditure. Similarly, he observed that in respect of Asjol Block the amount of Rs. 86,87,332, represent non- drilling capital expenditure. The Assessing Officer observed, non-drilling revenue expenditure cannot be allowed under section 37(1) of the Act but has to be considered as pre-operative and spread over the assets for allowance of depreciation. Further, he held that the prior year capital expenditure would be eligible for depreciation. Accordingly, he reduced the expenditure claimed by the assessee. Being aggrieved of the disallowance of expenditure claimed, the assessee preferred appeal before the first appellate authority. 43. After considering the submissions of the assessee in the context of the facts and material on record, the learned Commissioner (Appeals) observed that both PY-3 Block and Asjol Block have commenced production of oil during the relevant previous year. Therefore, he held that the expenditure....