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2007 (11) TMI 610 - HC - Income TaxApplicability of section 80IA(3) - Offshore drilling - claim made in respect of section 33AC - Whether the 'Deep Sea Mat drill' purchased by the assessee is a ship or not - We are of the opinion that only one view is possible, namely, that the 'Deep Sea Matdrill' is a ship. Even if learned counsel for the revenue is right in contending that the 'Deep Sea Matdrill' is not a ship, we do not think that exercise of power u/s 263 of the Act by the CIT would be justified only because the assessing officer has taken a view in favour of the assessee. The law requires the view to be erroneous and that has not been substantiated by learned counsel for the revenue . Deduction u/s 80-IA(3) - We find that under section 148 of the Act, the assessing officer had specifically mentioned in the reasons recorded that he was prima facie of the view that the vessel had been used in the Indian territorial waters prior to its acquisition by the assessee. A response was given by the assessee to the notice in which it was categorically mentioned that the ship was never used in India so deduction u/s 80-IA(3) could not be denied to the assessee. In all the three issues that have been urged by learned counsel for the revenue , no substantial question of law arises. The appeal is dismissed.
Issues:
1. Determination of whether the vessel purchased by the assessee qualifies as a ship for the purposes of section 33AC of the Income Tax Act. 2. Examination of whether the vessel was used in Indian territorial waters before its acquisition by the assessee for the application of section 80-IA(3) of the Act. 3. Assessment of compliance with the conditions under section 80-IA(4) of the Act regarding the operation and maintenance of infrastructure facilities. Issue 1: The High Court addressed the first issue concerning the classification of the vessel purchased by the assessee as a ship for section 33AC purposes. The Court noted that the vessel was previously determined to be a ship for depreciation purposes in the assessment year 1994-95. The Tribunal concluded that the vessel, described as a barge with a drilling rig, qualified as a ship under section 33AC. The Court agreed with this assessment, emphasizing that the vessel could be moved for offshore drilling, justifying the depreciation claim. It was held that the revenue could not repeatedly challenge the ship classification, supporting the assessee's claim under section 33AC. Issue 2: Regarding the second issue on whether the vessel was used in Indian territorial waters before acquisition for section 80-IA(3) application, the Court found this to be a factual matter. The assessing officer raised concerns about prior usage, but the assessee clarified that the vessel was never used in Indian waters. The Court observed that the assessing officer did not further investigate this issue after accepting the explanation provided by the assessee. The Court upheld the Tribunal's decision, noting that there was no material to contradict the assessing officer's view, supporting the assessee's claim under section 80-IA(3). Issue 3: In addressing the compliance with section 80-IA(4) regarding infrastructure facility operation, the Court determined this to be a factual inquiry without a substantial legal issue. The assessing officer had raised this during reassessment, and the assessee responded satisfactorily. The Court noted the existence of agreements related to infrastructure facilities, with one agreement having retrospective effect. The Court upheld the Tribunal's decision, emphasizing that no substantial legal question arose in this matter. In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decisions on all three issues presented by the revenue.
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