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TMI Blog1990 (9) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... rry on business of drilling, extracting, producing and selling petroleum and other crude oils in thePersian Gulf. 50 per cent of the petroleum produced was to be owned by the National Iranian Oil Co. and the balance 50 per cent by the other three parties viz. ONGC, AGIP and Philips which was 1/3rd equal in 50 per cent of the produce. After incorporation of the assessee-company, all the rights and interest of ONGC were assigned to M/s. Hydrocarbons India Ltd. 3. In the year 1978 some political changes took place inIranwhich resulted in cessation of business activities of the assessee company in that country. The assessee company did not exhibit any income from business operations for the previous years relevant to the assessment years 1980-81 and onwards. Here, we are concerned with these assessment years only. As a result of negotiations between the assessee company and the National Iranian Oil Co. through good offices of the Government of India, a settlement was arrived at between the parties as on 26-12-1983 whereby the assessee company was paid a sum of 6 million US Dollars by way of compensation for the rights and interest of the assessee company in the business operations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debatable question and keeping in view the decision of the Supreme Court in the case of CIT v. Chunilal V. Mehta Sons (P.) Ltd. [1971] 82 ITR 54, the interest on the said compensation under the settlement agreement was held to be taxable in the assessment year 1984-85. Therefore, on these findings, he set aside the finding of the IAC (Asst.) and directed him to recompute the total income of the assessee after disallowing the claim of the assessee under section 32 and under section 42 in regard to the business assets inIran. The assessee is aggrieved. 4. The learned counsel for the assessee Shri R.S. Singhvi submitted that the assessee company is a subsidiary company of the ONGC which is a Government of India Undertaking. The business of the assessee company was ceased on account of political turmoil and changes taken place inIran. Therefore, it was a temporary cessation of the business activities of the assessee company in that country. Even if the assessee company was not allowed to explore and extract oil inIran, the business was carried on by the Iranian Oil Company. The profits were received by the assessee company which has been credited in the books of account. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1972] 83 ITR 1 (Bom.) ; (3) CIT v. Simon Carves Ltd. [1976] 105 ITR 212 (SC) ; (4) CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) ; (5) Capital Bus Service (P.) Ltd. v. CIT [1980] 123 ITR 404 (Delhi) ; (6) CIT v. Vayithri Plantations Ltd. [1981] 128 ITR 675 (Mad.) ; (7) CIT v. Bharat Insurance Co. Ltd. [1983] 142 ITR 342 (Delhi) ; and (8) Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad.). The above decisions were cited for the proposition that if there is a temporary cessation of activities or lull in the business, it does not mean that there is no business activity and the expenditure should be allowed. Specifically relying on the decision of the Delhi High Court in the case of Capital Bus Service (P.) Ltd., it was submitted that mere change of opinion does not warrant revision of order of the IAC(Asst.). It was also pointed out that the IAC (Asst.) has considered the Audit report in which the note was given regarding change in the political situation and cessation of activity which was considered by the IAC (Asst.). Now after considering all that the Commissioner of Income-tax cannot take into consideration the same material that would amount to change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further beyond31-12-1978and the only source of income of the assessee was interest on moneys lent to the holding corporations though the assessee company had incurred some expenditure on account of this. But the fact that the assessee had incurred certain expenditure inIranjust like an exploration and development salary, rent etc. would not mean that the assessee had been carrying on business activities after that. After31-12-1978the assessee's stock of exploration and development remained with the Iranian Oil Co. after taking over of assessee's activity by Government of Iran. The assessee was given compensation under settlement arrived at on31-12-1978through good offices of the Government of India between the assessee and Iranian Oil Co. Therefore, there was no possibility of exploration of this asset. Even if there was exploration of oil by Iranian Oil Co. after abrogation of Joint Structure Agreement, it was not on behalf of the assessee or under a previous agreement dated17-1-1965but in its independent rights. There was no direct evidence for that also which may prove that the Plant Machinery was used by the assessee. Therefore, the assessee cannot take any benefit of this f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the earlier agreement dated17-1-1965by subsequent agreement dated26-12-1983. Therefore, the subsequent agreement has taken place over the previous one. Now this is only an agreement under which rights and obligations of the parties have to be determined. Even if the assessee's assessment for assessment year 1980-81 was completed under the earlier agreement dated17-1-1965, it does not mean that the assessee can take advantage of this situation. The re-opening of the assessment depends upon the time limit prescribed for reopening. The reopening of the assessment for the assessment year 1980-81 was time-barred, therefore, the Commissioner of Income-tax has not taken any action. So far as the contention of the assessee that section 42 override the provisions of Income-tax Act and the assessee is entitled to benefit of section 42, is concerned, we have already mentioned that the agreement was nullified by subsequent settlement and secondly the claim of the assessee company under section 42 is dependent upon the continuance of the business activities because sections 28 to 43 set out the provisions of any profession or business carried on by the assessee at any time during the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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