Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2013 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (9) TMI 758 - AT - Income TaxDeduction u/s 80IB for extracting of oil. 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 meaning of these word is neither manufacture nor production and accordingly asked the assessee to justify its claim u/s 80IB. - Held that - 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. 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 verified natural gas. Therefore, as per the agreement, the assessee Is bound to perform Its part and once the assessee is carried its operation In accordance with the terms and conditions of the said Agreement with the Govt. the benefit of the deduction u/s 801B is allowable to the assessee - Decided in favor of assessee. Disallowance of loss due to cyclone - Since amount of receipt was confirmed to be taxed in this year, being insurance amount received from United Insurance Co., the loss is required to be allowed to the assessee. Since AO also did not examine the issue in its correct perspective, instead of remitting the matter to the ld. CIT(A), we consider it appropriate to remit the matter to the file of AO to examine the issue and allow loss. Decided in favor of Assessee. Site restoration fund - section 33ABA - AO restricted the deduction claimed under section 33ABA of the Act at 20% of the profits and gains from business as computed by assessee - held that - the assessee has furnished the necessary report of the auditor - 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. - Decided in favor of assessee.
Issues Involved:
1. Deduction under section 80IB(9) 2. Disallowance under section 14A 3. Disallowance of loss due to cyclone 4. Disallowance of Site Restoration Fund 5. Penalty under section 271(1)(c) Analysis of the Judgment: Deduction under Section 80IB(9) The primary issue revolves around whether the extraction of oil qualifies as "production" under section 80IB(9). The assessee, an oil exploration company, claimed deductions for profits from oil extraction. The Assessing Officer (AO) initially denied this, arguing that extraction did not constitute "manufacture" or "production." The CIT(A) upheld this view. However, the ITAT referred to previous judgments, including Supreme Court rulings, which clarified that "production" has a broader meaning than "manufacture" and includes extraction activities. The ITAT concluded that the assessee's activities did qualify as production under section 80IB(9). The case was remanded to the AO for verification of facts, particularly concerning the income from different oil fields. Disallowance under Section 14A The assessee had exempt income, and the AO and CIT(A) disallowed amounts by invoking Rule 8D. The ITAT noted that Rule 8D was not applicable for the assessment years in question. The matter was remanded to the AO to determine a reasonable amount for disallowance under section 14A, guided by the principles laid down by the Hon'ble Jurisdictional High Court in the Godrej & Boyce Mfg. Co. Ltd. case. Disallowance of Loss Due to Cyclone The assessee claimed a short-term capital loss due to a well lost in a cyclone. The AO did not accept the cost of acquisition and brought the insurance claim to tax on a protective basis. The CIT(A) confirmed the taxation of the insurance claim but did not adjudicate the loss claimed. The ITAT found that the AO did not fully understand the claim and remanded the matter back to the AO for proper examination and allowance of the loss. Disallowance of Site Restoration Fund The AO restricted the deduction under section 33ABA to 20% of the profits, which the CIT(A) upheld, stating that the assessee did not prove fulfillment of conditions. The ITAT noted that the AO had allowed the deduction on the returned income but did not revise it after making additions. The ITAT directed the AO to re-examine the issue and allow the deduction as per the provisions, after giving the assessee an opportunity to present their case. Penalty under Section 271(1)(c) The Revenue appealed against the deletion of penalties imposed under section 271(1)(c). The CIT(A) had deleted the penalties, noting that the assessee had not concealed any income and that the claims were not found to be inaccurate or false, only unsustainable in law. The ITAT upheld the CIT(A)'s decision, emphasizing that mere disallowance of a claim does not amount to furnishing inaccurate particulars of income. The penalties were confirmed as deleted. Conclusion The appeals by the assessee were largely allowed for statistical purposes, with directions for further verification and proper examination by the AO. The appeals by the Revenue regarding the penalties were dismissed. The judgment underscores the importance of a nuanced understanding of terms like "production" and the necessity for thorough verification of facts in tax assessments.
|