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TMI Blog2013 (9) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to manufacture or production of mineral oil or not. 2.3 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. 2.4 The assessee contended, before the Assessing Officer that the assessee is engaged in the exploration, development and production of natural oil gas. As this activity requires huge investment and involves high risk, the assessee Invariably does such exploration, development and production by forming or joining consortium or unincorporated joint venture with foreign or Indian companies or both. The assessee relied upon various decisions of Hon'ble Supreme Court as well as Hon'ble High Courts on the point of interpretation of the word/terms 'production' and submitted that the word production has a wider connotation than the word manufacture. The assessee claimed the activity of exploring and extracting mineral oil is certainly production. 2.5 The Assessing Officer did not agree with the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. Therefore, the Issue is related with the 'production' and not 'mineral'. It is settled proposition of law as laid down by the Hon'ble Supreme Court that the word production as used in sec. 801B of the I T Act has a wider connotation as compared to the )rd manufacture. In all the cases, on which reliance has been placed by the Ld. Sr. Counsel for the assessee, some amount of process at various stages was involved and in that view of the matter, the Hon'ble Supreme Court as well as Hon'ble High Courts have held that there certainly an activity which gives in the character of production. 8.2 In the case of CIT vs Sesa Goa Ltd , the Hon'ble Supreme Court had an occasion to consider mining of ore production. It was noted that the assessee in the extracting process of iron ore, the High Court came to the conclusion that extraction of iron ore and the various process would involve 'production' within the meaning of sec 32A(2)(b)(iii) of the I.T Act and consequently, the assessee was entitled to the benefit of investment allowance under sec. 32A. The view expressed by the High Court that the activity of extraction and processing of Iron ore constitute production has been affirmed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en explained in the Explanation as under: [Explanation.--For the purposes of this section, "mineral oil" Includes petroleum and natural gas.] We further note that u/s 293A, the meaning of mineral oil has been given as under: "Mineral oil' includes petroleum and natural gas - Notification No. GSR 645(E) dated 6.7.1987. 11. We further note that as per Production Sharing Contract dated 30th Dec 1994, the definition of crude oil Is given under clause 1.27 as under: "Crude oil" means crude mineral oil, asphalt, ozokerite and all kinds of hydrocarbons and bitumens, both in solid and in liquid form, In their natural state or obtained from Natural Gas by condensation or extraction, Including distillate and Condensate when commingled with the heavier hydrocarbons and delivered as a blend at the delivery point but excluding verified natural gas." V 11.1 The term 'oil' as understood by parties i.e. Government of India and other companies Including the assessee as 'crude oil' as per clause 1.58 of the said Contract and crude oil means crude mineral oil along with the other contents as given in clause 1.27 of the Contract. Therefore, oil, crude oil, petroleum are considered as synon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sale and nothing else. 12.2 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: 13 Since we have allowed, the clime of the assesssee on merit, therefore, the Issue of Rule of consistency has become only academic In nature and does not require any finding. 14. Though the issue of production of mineral oil has been decided on principle in favour of the assessee; however, It Is transpired from the assessment order as the Assessing Officer has recorded in pare 2 at page 1 of assessment the for the AY 2003-04 that the assessee has claimed deduction u/s 80lB in respect of sale of oil from PY-3 Block field in the cauvery offshore area and Asjol oil field in Gujarat. A specific query was put to the parties for clarification vide order dated 16.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be verified. 17. In view of the above discussion, the Issue is remanded back to the records of the Assessing Officer for the limited purpose to verify whether the claim of deduction u/s 8OlB also includes the turn over and income from sale of Asjol oil field and the discrepancy between the amounts mentioned in the tax audit report and assessment order. Accordingly, we direct the Assessing Officer to work out the deduction after verification of these facts." 4.1 Since the issues were elaborately discussed in the co-ordinate Bench order in assessee's own case, we uphold assessee's contention and direct the AO to allow deduction under section 80IB after examination of facts as directed in earlier years. Grounds are considered allowed. 5. Ground Nos.19 and 20:- These grounds pertain to disallowance under section 14A. The assessee has exempt income and AO and CIT(A) disallowed the amount invoking Rule 8D. It is clearly admitted that this issue has to go back to the AO for considering disallowance, keeping in mind the principles laid down by the Hon'ble Jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd., 328 ITR 81(Bom). Accordingly the AO is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance claim received . In the insurance claim assessee claimed total cost of PD-3 well at Rs.17,03,82,590/-. As the well was lost in cyclone, Assessee made insurance claim in assessment year 2004-05 which was brought to tax in that year on accrual basis by AO. However, the assessee received the insurance claim settled by the insurance company at Rs.6,41,36,100/- during the year and after settling this amount against total cost, arrived at a net loss of Rs.10,62,46,490/-. Since there was gain of Rs.3,75,863/- on other item, the net capital loss was claimed in the computation of income. The AO extracted the details in page -23 of the order, but on the reason that assessee has not furnished full and complete details of working and supporting documents in respect of cost of acquisition at Rs.17,07,82,590/-, he did not accept the cost of sale and further, since insurance claim was received during the year he brought to tax the receipt of insurance on a protective basis. When the assessee contested the same before the CIT(A), to the extent of assessing insurance claim was confirmed on substantive basis, following the orders for the assessment year 2005-06. Therefore, assessee is aggrieve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined, 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. This aspect is restored to the file of the AO for necessary computation after giving due opportunity to assessee. Ground 23 is treated as allowed. 14. In the result, assessee appeal is allowed for statistical purposes. ITA Nos.752 753/Mum/2011: 15. These are appeals by Revenue against the deletion of penalty u/s 271(1)(c) on the disallowances made by the AO in the assessment order. Since many of the additions made were confirmed by CIT(A), AO finalized the penalty at Rs.22.65 crore for the assessment year 2005-06 and Rs.25.45 crore for the assessment year 2006-07. Ld. CIT(A) after considering nature of disallowances, mainly comprising of disallowance of claim under section 80IB, deleted the penalty . His order at para-9 for assessment year 2005-06 is as under :- "In the instant case the appellant had not concealed any income. It is seen that two different AOs took two different views on the same sets of facts concerning the claim of deduction u/s. 80IB. Thus i ..... 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