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TMI Blog2013 (7) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... eir effective date and have extension provisions. The petitioner in the returns for the assessment years 2001-02, 2003-04 and 2004-05, claimed and was allowed deductions under section 42 of the Act. However, in respect of the assessment year 2005-06, the Assessing Officer denied the benefit under section 42, vide order dated December 31, 2007. Several other additions were made. This had resulted in an additional demand of Rs. 1,24,45,509. The petitioner has filed an appeal against the assessment order before the appellate authority. It appears that the appeal is pending. The Assessing Officer has also issued notices for reassessment in respect of the assessment years 2001-02, 2002-03, 2003-04 and 2004-05, on the ground that the petitioner was wrongly given the benefit of deduction under section 42 of the Act in the said years. Section 42 of the Act reads as under : "42. Special provision for deductions in the case of business for prospecting, etc., for mineral oil.-(1) For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation to which the Central Government has entered into an agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nallowed, so much of the excess as does not exceed the difference between the expenditure incurred in connection with the business or to obtain interest therein and the amount of such expenditure remaining unallowed, shall be chargeable to income-tax as profits and gains of the business in the previous year in which the business or interest therein, whether wholly or partly, had been transferred : Provided that in a case where the provisions of this clause do not apply, the deduction to be allowed for expenditure incurred remaining unallowed shall be arrived at by subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed Explanation.-Where the business or interest in such business is transferred in a previous year in which such business carried on by the assessee is no longer in existence, the provisions of this clause shall apply as if the business is in existence in that previous year ; (c) are not less than the amount of the expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed in respect of the previous year in which the business or interest in such business is transferred or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 293A and that, vide the production sharing contracts, which involved participation of the Government in the form of share in production, concessions as to tax could be granted under sections 293A and 42 of the Act. (c) The Ministry of Petroleum and Natural Gas had written the letter dated February 23, 1998, for submission of Hindi translations of the contracts in view of the requirement that English and Hindi versions of the production sharing contracts must be placed before Parliament. In this letter, it was specifically stated that in order to give effect to the provisions in the contract as per section 42 of the Act, 50 copies each, of both Hindi and English versions, of the production sharing contracts were required. The case of the petitioner-assessee is that the necessary translation was made and the documents as required were furnished. (d) Reconciliation of financial statements between petitioner and the Ministry of Petroleum and Natural Gas shows that the Government of India's "petroleum profit" has been calculated with the benefit under section 42 of the Act. The Comptroller of Audits and Accounts has also verified and accepted the said computation. (e) The benefit un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (h) The requirement under section 42 of the Act is that the contract should be laid before Parliament, as a condition subsequent and is not a prior condition and, therefore, even now the production sharing contracts can be placed before Parliament. Reliance was placed on Atlas Cycle Industries Ltd. v. State of Haryana [1979] 2 SCC 196, wherein it has been held as under : "22. Now, at page 317 of the aforesaid edition of Craies on Statute Law, the questions whether the direction to lay the rules before Parliament is mandatory or merely directory and whether laying is a condition precedent to their operation or may be neglected without prejudice to the effect of the rules are answered by saying that 'each case must depend on its own circumstances or the wording of the statute under which the rules are made'. In the instant case, it would be noticed that sub-section (6) of section 3 of the Act merely provides that every order made under section 3 by the Central Government or by any officer or authority of the Central Government shall be laid before both Houses of Parliament, as soon as may be, after it is made. It does not provide that it shall be subject to the negative or the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on his behalf that in the absence of distinct words in the statute stating that the rules would be operative in the interval from the time they were made to the time when Parliament should meet next or if Parliament was sitting then during the month during which Parliament had an opportunity of expressing its opinion upon them, no rule made as supplementing the schedule could be operative so as to render a person liable to be convicted for infraction thereof unless the same had been laid before Parliament, it was held overruling the contention that the rules became effective from the time they were made and it could not be the intention of the Legislature that the laying of the rules before Parliament should be made a condition precedent to their acquiring validity and that they should not take effect until they are laid before and approved by Parliament. If the Legislature had intended the same thing as in section 4, that the rules should not take effect until they had the sanction of Parliament, it would have expressly said so by employing negative language." Separate counter-affidavits/affidavits have been filed by the Ministry of Finance and by the Ministry of Petroleum and Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contractual issues when justified and necessary, as per the ratio expounded and explained by the Supreme Court in Kumari Shrilekha Vidyarthi v. State of U. P. [1991] 1 SCC 212 and ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. [2004] 118 Comp Cas 213 (SC) ; [2004] 3 SCC 553. We note that the writ petition has remained pending before this court since August, 2008, and it may not be proper and appropriate to dismiss the same and ask the petitioner to file a civil suit at this stage. The dispute, though factual, can be decided on the facts and material on record and on the basis of the official records. This brings us to the core or the main issue : Whether the benefit under section 42 of the Act was envisaged in the 1992 NIT 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 ? If the question is decided in favour of the petitioner, the second aspect is whether a direction can be issued for grant of the benefit under section 42 of the Act to the petitioner, with a further direction that the contract should be laid before Parliament after inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract area. (b) The contractor shall not be liable for payment of sales tax on sale of crude oil to the Government/its nominee, which shall be payable by the buyer." There is no reference to section 42 of the Act. There is no letter or correspondence written by the petitioner from 1995 onwards stipulating that, by mistake or due to oversight, section 42 benefit was not mentioned in the written production sharing contracts. Letter dated February 23, 1998, written by the Desk Officer, Ministry of Petroleum and Natural Gas refers to the section 42 and the requirement to table the contract in both Houses of Parliament and therefore, 50 copies of Hindi and English version were required. However, this letter can be explained as having been written in routine as in several production sharing contracts benefit under section 42 was granted and thus contracts were required to be placed before Parliament. This letter by itself or even with other letters, etc., does not justify the claim of the petitioner. Learned counsel for the petitioner is justified in relying upon the three letters written by the Ministry of Petroleum and Natural Gas to the Ministry of Finance being letters dated June ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion sharing contracts for small sized fields were signed, out of which the two production sharing contracts signed with the petitioner are part of these production sharing contracts. The other production sharing contract mentioned by the petitioner were signed under different NITs . . . 11. That the referred position was observed from the scrutiny of records by the Ministry of Petroleum and Natural Gas, after another contractor of similarly placed Hazira production sharing contract, i.e., M/s. NIKO Resources brought to the notice of this Ministry in May, 2005, that the Revenue authorities had started disallowing the benefit of section 42 of the Income-tax Act, 1961, to the said production sharing contract. It may be stated here that no contractor out of these 13 small size fields as referred to in paragraph 9 above, including the petitioner, made any representation to the respondent-Ministry earlier about incorporating the clause pertaining to section 42 of the Income-tax Act in respective production sharing contract. It is also submitted that as already stated in paragraph 4, if the position taken by the petitioner is taken to be correct that the model production sharing contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it dated August 3, 2009, have tried to controvert the said statement/averments and stated that in 1994-95, production sharing contracts were signed for Rawa Oil Field and Panna Mukta Oil Fields. The respondents have contested and pointed out that these fields were not small scale discovered fields. The petitioner has stated that in 2000, Assam Co. Ltd. was granted the benefit of section 42 in respect of Amguri Oil Field, which was a discovered field. However, in the present case, we are concerned with the year 1993-94 and not with the year 2000 and in 1999 NELP was adopted. We may note here that the petitioner along with the said affidavit has filed on record an extract from their tender/bid. In the tender/bid, the petitioner had stated as under : "In the absence of formal terms and conditions, the following clarifications/qualifications are necessary based on a reading of the 'model contract' : (1) The model covers all aspects of petroleum operations, including exploration, discovery and development of oil fields, and it will have to be radically pruned to suit the present purpose, viz., development of a discovered oil field. (2) The various provisions of the model are so inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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