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TMI Blog2004 (11) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of inter alia, construction, fabrication, erection, installation, commissioning of the hydro-treater project at the site in Guwahati and conduct Performance Guarantee test Runs essential for completion and establishment of a fully functional and operative hydro-treater and hydrogen generation unit. Design and engineering services. Supply of equipment. 4. For the assessment year 2001-02 Technip filed its return on 31-10-2001 declaring a loss of ₹ 54.372 crore. Assessment was completed at a loss of ₹ 44.54 crore under section 143(3) vide order dated 30-1-2003. While completing the assessment the provisions for committed losses of ₹ 9.82 crore were disallowed by the Assessing Officer. On examination of assessment records the Commissioner of Income-tax noted that Assessing Officer did not examine the applicability of section 44BB. It was further noted by CIT that during the course of assessment proceedings, the Assessing Officer did not examine the various expenses claimed in the profit loss account. The CIT was of the view that Assessing Officer had not paid any attention nor examined the genuineness or allowability of expenses of ₹ 130 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that complete books of accounts are maintained and, therefore, there is no question of application of section 44BB. The reliance was placed on various case laws mentioned in the written submissions. Thereafter the CIT after considering the order of the Assessing Officer and submissions of the counsel of the assessee and various other case laws, reported in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi); Malabar Industrial Co. Ltd. v. CIT [1992] 198 ITR 611 (Ker.), Thalibai F. Jain v. ITO [1975] 101 ITR 1 (Kar.) and CIT v. Pushpa Devi [1987] 164 ITR 639 (Pat.), formed an opinion that applicability of provisions of section 44BB was not examined. The CIT further viewed that, without examining the authenticity of completion method, the Assessing Officer agreed to the assessee's stand that sum of ₹ 30.53 crore had not become due. The CIT, further, was of the view that genuineness and allowability of expenses, except for provision of ₹ 9.82 crore, was not examined. Therefore, he cancelled the assessment to be passed de novo. Now the assessee is in appeal here before the Tribunal against the order of CIT. 6. The counsel of the assessee strongly placed reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies from the stage of finding/locating mineral oil to the stage of bringing the same on the surface. Services and facilities after the mineral oil is brought on the surface are not covered by section 44BB because mineral oil cannot be manufactured but can only be produced. Refer Stonecraft Enterprise v. CIT 237 ITR 131 (SC). 4. Though, generally, inclusive definition enlarge the meaning of the word defined, however, definition of 'mineral oil' is exhaustive. The purport of the definition cannot be pressed beyond its true limits. It is correct that the word 'include' is generally used to enlarge the meaning of the words or phrases occurring in the statute. When, it is so used, those words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the definition declares that they shall include. But, if the inclusive definition was not employed for the purpose of adding to the natural meaning of the word defined, in that case, is to be taken as exhaustive in nature. In the present case, the ordinary meaning of the word 'mineral oil' has not been enlarged/extended. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from 'crude oil', it was held that assessee was engaged in manufacturing process. On the same logic, it is submitted that crude oil/petroleum is quite different from petrol, diesel, kerosene etc. (c)Amendment to section 80IA(4E) by Finance (No. 2) Act, 1998 indicate that 'refining of mineral oil' is different from 'production of mineral oil' and has been so understood by the Legislature. Prior to 1-4-1999 undertaking engaged in commercial production of mineral oil the north-eastern region were entitled to the tax holiday under section 80-1A. With effect from 1-4-1999, the benefit was extended to undertaking engaged in refining of mineral oil. Had the refining of mineral oil been included in production of mineral oil, there would have been no need for the Legislature to specifically include undertaking engaged in refining of mineral oil in section 80-IA (4E). 6. Without prejudice, even if the word 'production' is read widely to include 'manufacture', still, the provisions of section 44BB are not applicable because hydro-treating facility provided by 'Technip' does not amount to 'manufacture'. It is well settled that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esel hydro-treating unit and hydrogen generation unit are interjecting units which merely reduce the sulphur content of diesel already manufactured by Guwahati Refinery. Thus, the services/facilities provided by Technip are not in connection with prospecting for, extraction or production of mineral oil, rather the same are in connection with manufacture of diesel, a by-product of mineral oil. Indian Oil Corporation in their certificate dated 5-6-2003 which was filed before CIT, clearly stated that hydro-treater unit set up by Technip at IOCL's Guwahati Refinery was not meant for exploration and production of crude oil. 7. Without prejudice, where a non-resident company has incurred a loss, there tax cannot be charged on deemed basis. Mumbai Bench of Tribunal in the case of Waterman Steamship Corpn. v. ITO, considering section 44B relying upon UOI v. A. Sanyasi Rao, 219 ITR 330 (SC) has accepted this proposition. 8. The language of section 44BB being unambiguous, does not call for reading of any words which it does not contain. The words 'in the prospecting for, or extraction or production of mineral oil' used in section 44BB only cover the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Assessing Officer to examine the applicability of section 44BB. It was also submitted that the amount of ₹ 30.53 crore received by assessee was held by the Assessing Officer that the same has not accrued as income of the year, was also not justified as the Assessing Officer has not made proper enquiry to hold so. It was further added that in regard to foreign expenditure claimed in profit loss account, no enquiry at all was made by the Assessing Officer. Therefore, the CIT was correct in initiating proceedings under section 263 of the Income-tax Act and thereafter canceling the assessment to be made de novo. Further attention of the Bench was drawn on various documents placed in the paper books filed by the department as well as by assessee. 8. In reply, the counsel of the assessee placed reliance on the written rejoinder placed on record. 9. We have heard rival submissions and considered them carefully. We have also perused the material to which our attention was drawn. We have also considered the various case laws as relied upon by both the parties. After considering the rival submissions and perusing the material on record, we found that assessee deserve to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44AC and 206C of the Income-tax Act, 1961 was to enable the revenue to collect the legitimate dues of the State from the persons carrying on particulars trades in view of the peculiar difficulties experienced in the past. Trade or business produces or results in income which can be brought to tax. In order to prevent evasion of tax legitimately due on such 'income', sections 44AC and 206 were enacted, so as to facilitate the collection of tax on that income which is bound to arise or accrue, at the very inception itself or at an anterior stage. These provisions are akin to advance tax. The standard by which the amount of tax is measured, being the purchase price, will not in any way alter the nature and basis of levy, viz., that the tax imposed is a tax on income. It cannot be labelled as a tax on purchase of goods. The basis of a charge relating to income-tax is laid down in sections 4 to 9. Section 44AC read with section 206C are only machinery provisions and not charging sections. What is brought to tax, though levied with reference to the purchase price and at an earlier point, is none the less income liable to be taxed under the Income-tax Act. Article 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee. 12. The Hon'ble Apex Court in case of CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625 while interpreting the amended statute on a later stage that whether they are clarificatory in nature or they are applicable from the date of enactment of the amendment, has held as under:- The presumption against retrospective operation is not applicable to declaratory statutes. A declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oils, the provisions of section 44BB are applicable or not. 15. Now we will take the next objection of CIT that Assessing Officer has not taxed the amount of ₹ 30.53 crore though the assessee has received this amount. Detailed arguments were made on this issue also. The learned counsel of the assessee has invited the attention of the Bench to the photocopy of order-sheet prepared by Assessing Officer during the course of assessment proceedings. Attention of the Bench was drawn to order-sheet dated 16-1-2003, where a specific query was raised by Assessing Officer in regard to the amount of ₹ 30,53,09,916. It was further stated that the detailed reply was filed whereby it was stated that the amount of ₹ 30.53 crore was not accrued to the assessee for the year under consideration. It was further clarified that this amount pertains to subsequent year and in subsequent year the same has been offered for taxation. Attention of the Bench was drawn to relevant portion of the assessment order of the Assessing Officer. On the other hand, the counsel of the department has strongly supported the order of CIT and it has been further stated that Assessing Officer has not exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit for the computation of income purposes. After considering these submissions of the counsel of the assessee, the Assessing Officer further observed in his order that this amount has been shown in the subsequent years when the work was completed and certified as per terms of contract. The contention of the assessee was also taken into consideration that in respect of this amount of ₹ 30,53,09,916, the assessee had neither realized the amount nor raised the bills or invoices during the year under consideration, for which the amount was not due to be received by the assessee. From these discussions made by Assessing Officer in his order, it is clearly established that a specific query was raised and the assessee had filed reply and after considering the reply the Assessing Officer was satisfied with reply, therefore, the same was excluded from the total receipts and resultant loss of ₹ 30.53 crore was allowed by the Assessing Officer. The contentions of the CIT as well as the counsel of the department that the Assessing Officer has not passed a speaking order, in our considered view, are not tenable. As stated above, a specific query was raised and the reply was file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually an error either of fact or of law. 17.2 Writing an order in detail may be a legal requirement but the order not fulfilling this requirement cannot be said to be erroneous and prejudicial to the interest of the revenue. It is for the Commissioner to point out as to what error was committed by the Assessing Officer in having reached the conclusion that the receipt of ₹ 30.53 crore was assessable in the hands of the assessee. The Hon'ble Allahabad High Court in the case of CIT v. Goyal Private Family Specific Trust [1988] 171 ITR 698, has held that in the absence of a finding by the Commissioner of Income-tax that the assessment orders were erroneous, the cancellation of assessments was not justified. The Tribunal was justified in setting aside the order of the Commissioner and no question of law arose from his order. While holding so the Hon'ble High Court has observed that The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the revenue. It has been also ..... 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