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TMI Blog2014 (3) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per paragraph 10.3 of the loan agreement dated 21st July, 1994 with State Bank of India, Singapore, the petitioner was liable to pay principal, interest and other sums as required in full without deduction of tax, fee, duty premiums and any other charge whatsoever imposed by revenue authorities and in the event, the petitioner was compelled to make any such payment or deduction, the petitioner as the borrower was required to bear and pay the additional sum as necessary to ensure that the bank received payment in full in respect of the principal, interest or otherwise. 4. By letter dated 25th July, 1994, the petitioner applied for exemption under Section 10(15)(iv)(c) of the Income Tax Act, 1961 (Act, for short) with the Central Board of Direct Taxes (CBDT). The CBDT by their letter dated 3rd August, 1994 asked the petitioner to clarify whether it was an "industrial undertaking" under the Act, to which the petitioner responded vide letter dated 11th August, 1994. 5. By letter dated 9th September, 1994, the petitioner was directed to show cause why their application should be approved as the petitioner was engaged in giving on hire the equipments but was not engaged in manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioner were themselves engaged in mining. This was followed by another letter dated 31st July, 1995 stating that the petitioner"s contention had been reexamined but were not acceptable. Petitioner was not an industrial undertaking as defined in Explanation to Section 10(15)(iv) of the Act as the petitioner was not engaged in mining but was only carrying on activities, that helped in actual mining operations carried on by ONGC. 7. During the course of hearing before us, we have asked the respondents to examine and verify whether any other party undertaking similar work has been granted benefit under Section 10(15)(iv)(c) of the Act. Respondents have filed letter dated 19th December, 2013 written by Ministry of Finance, Department of Revenue, Foreign Tax & Tax Research Division-II, stating that benefit of Section 10(15)(iv)(c) was available for money borrowed and debt incurred before 1st June, 2001. The record pertaining to exemption under the said Section was very old and as per the record available no case pertaining to exemption for work over rigs was found. 8. Section 10(15)(iv)(c) of the Act along with Explanation applicable at the relevant time read as under:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng" means any undertaking which was engaged in mining. 10. The short question is whether the petitioner was an undertaking which was engaged in mining. The words "engaged" and "mining" have not been defined in the Act and have to be read and interpreted as they are understood in normal parlance. The word "mining" in common parlance means working on mines for ores, oil and other minerals. "Mining" as defined in Black"s Law dictionary, Sixth Edition means process or business of extracting from earth precious or valuable metals, either in their native state or in their ores. Extracting or excavating mineral oils could be included in the term "mining". The petitioner in the writ petition has referred to the expression "mining" as defined in the Oil Fields (Regulation & Development) Act, 1948 etc. However, we do not think it necessary to refer to the definition clause in a particular enactment which has not been made applicable to the Act. We have no doubt in our mind that extracting mineral oil could be covered within the meaning of mining activities. An industrial undertaking having oil fields and excavating or winning oil from oil fields would be engaged in mining. (The question whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinuous action. The said word means more than a single act or transaction and it involves some continuity of action. It connotes to take part in or to be employed in the said continuous transaction. It refers to involvement of oneself or employment in specified activities in relation to which the expression is used. Thus, significantly the word "engaged" does not refer to the entire or the whole but even part thereof or participating in the specified activity. 14. An industrial undertaking will be engaged in mining if the activities undertaken by the said undertaking are an integral and an inseparable part and substantial or predominantly devoted to mining. In such an event, the undertaking in question is engaged in mining, even when the said undertaking does not itself extract minerals, ores or oil. The words "engaged in" tends to broaden the meaning attached to the activities specified in the Explanation to mean and include the said activities which would be continuous and should be integral and directly associated with mining. 15. It is necessary and important to give wide interpretation while interpreting the expression "engaged in ..... mining" as it would further the legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow through the earlier wide bore. Before any work over, the well must be killed and thereafter the work over specialist takes over to carry out intensive operation which often requires skills of no lesser capacity than drilling a rig. The work over begins by removing the well head and possible flow line etc and then it is completed by adopting various methods including setting up new packer or running new tubing down to the top of the old. Such operations are complex and have to be planned well in advance. 18. It would be important here to reproduce the work which were assigned to the petitioner as per the contract which reads : "A. Completion Jobs : i) Single Horizon Completion ii) Dual/Multiple horizons completion. iii) Completion with artificial lift system. iv) Gravel pack completion. B. Work-over for : i) Water Shut off. ii) Gas Shut off. iii) Improving production by stimulations i.e. acidizing, fracturing etc. C. Repairs of Well for: i) Casing leaks. ii) Bad cement jobs. D. Services job : i) Bottom Clearing ii) Transfer of well to new horizon. iii) Fishing operations. E. Any other job that may come up during work over/servicing of wells." 19. The contract a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project undertaken by the recipient would not fall or treated as fee for technical services. It was observed that the petitioner was not undertaking a mining or like project as it was not extracting or winning any ore or oil but was only rendering services in connection or in relation to the mining project. Reference was made to earlier decisions of the AAR reported in (1998) 234 ITR 371 (AAR) and (2012) 346 ITR 549 (AAR). The said decisions proceed on the basis of language of Explanation 2 and the expressions used therein, "construction, assembly, mining or like project undertaken by the recipient". The recipient, therefore, should have undertaken the mining or like project and merely rendering a service to the third party undertaking the mining project did not qualify and come under the exception. It was accordingly held that the consideration/fee was taxable as fee for technical service. The said decision does not deal with or answer the question or issue raised in the present writ petition as language of the Explanation to Section 10(15)(iv)(c) is entirely different. We have held that the expression "engaged in mining" would not only include the actual winning or extraction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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