2013 (7) TMI 809 - HC - Income Tax

Benefit u/s 42 - business for prospecting, etc., for mineral oil - Whether the benefit u/s 42 was envisaged in the notice inviting tender and in the production sharing contracts but due oversight or mistake the same was not included and mentioned in the written contract and if so the effect thereof - Held that - It is not possible to accept the contention of the petitioner that the benefit u/s 42 was inadvertently missed out or due to an oversight not included in the written contract - Court examined the original records and found that under the terms and conditions, as well as in the notes, no benefit u/s 42 was envisaged or was required to be granted -the statement of the learned Additional Solicitor General that the three letters mentioned above were factually incorrect - thus no legal right on the basis of the letters accrues/arises - no statement or promise that advantage u/s 42 would be available to the successful bidder was promised or made petition decided against assessee.

Issues Involved:
1. Entitlement to benefit under section 42 of the Income-tax Act, 1961.
2. Jurisdiction of Delhi High Court.
3. Contractual dispute and oversight in contract terms.
4. Discrimination in granting benefits under section 42.

Issue-wise Detailed Analysis:

1. Entitlement to Benefit under Section 42 of the Income-tax Act, 1961:
The petitioner, Joshi Technologies International Inc., sought a mandamus claiming entitlement to benefits under section 42 of the Income-tax Act, 1961, for two production sharing contracts (PSCs) dated February 20, 1995, for oil fields in Dholka and Wavell, Gujarat. The petitioner contended that the Ministry of Petroleum and Natural Gas had inadvertently failed to incorporate section 42 in the PSCs and did not table the contracts before Parliament, thus denying them the benefits. The petitioner argued that this oversight should not penalize them. However, the court found no evidence that the 1992 Notice Inviting Tender (NIT) included the model production sharing contract (MPSC) or that the benefit under section 42 was envisaged at the time of contract execution. The court noted that the petitioner did not raise the issue of section 42 during contract negotiations or shortly thereafter, and the Ministry of Petroleum and Natural Gas did not intend to grant such benefits for small discovered oil fields, unlike undiscovered fields where the risk was higher.

2. Jurisdiction of Delhi High Court:
The Ministry of Finance raised preliminary objections regarding the territorial jurisdiction of the Delhi High Court, arguing that the assessment order was passed in Ahmedabad, Gujarat. However, the court held that the petitioner's challenge was not against the assessment order but against the alleged oversight in the PSCs, which were executed in Delhi. Thus, the Delhi High Court had jurisdiction as the cause of action substantially arose in Delhi.

3. Contractual Dispute and Oversight in Contract Terms:
The court examined whether the failure to incorporate section 42 in the PSCs was a result of an oversight or a deliberate decision. The petitioner relied on letters from the Ministry of Petroleum and Natural Gas to the Ministry of Finance, indicating an oversight. However, the court found these letters to be internal correspondence, not contemporaneous with the contract execution. The court scrutinized the original files and found no evidence that section 42 benefits were intended to be part of the PSCs. The court concluded that the petitioner was aware of clause 16.2 of the MPSC but did not request the inclusion of section 42 benefits in their bid.

4. Discrimination in Granting Benefits under Section 42:
The petitioner argued that other PSCs were granted benefits under section 42, leading to discrimination. The respondents clarified that benefits under section 42 were granted for undiscovered oil fields due to higher risks, not for small discovered fields like those of the petitioner. The court accepted this explanation, noting that the petitioner's fields were small discovered fields with lower risks, justifying the differential treatment.

Conclusion:
The court dismissed the writ petition, finding no merit in the petitioner's claims. The court emphasized that the petitioner did not establish that the omission of section 42 benefits was an oversight or that such benefits were intended to be included in the PSCs. The court also expressed displeasure over inaccurate statements in the additional affidavit filed by the Ministry of Petroleum and Natural Gas but did not proceed further on this aspect as the petitioner did not seek a refund of the "excess" petroleum profit paid to the government. The writ petition was dismissed without any orders as to costs.

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