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TMI Blog2023 (6) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished tax audit report of the operator CEIL perusal of which shows that TDS requirement have been duly complied with the operator. hence, the disallowance made by the AO on account of exploration development expenditure per se and on account of infraction of provisions of Section 40(a)(ia) are liable to be deleted. The order of the Id. CIT(A) on this ground is affirmed. Disallowance of time cost expenses - Ground stood allowed by CIT(A) - HELD THAT:- As in own case [ 2023 (1) TMI 1284 - ITAT DELHI] as affirmed the CIT(A) s order in allowed the assessee s claim of time cost expenses, inter alia, by observing that for making a disallowance under section 40A of the Act, the onus is on the AO to establish that the payments made by the assessee were excessive and unreasonable. In the present case, the AO made disallowances without discussing even the nature of expenses and its reasonableness. Hence, the disallowance proposed to be made is bad in law and deserves to be deleted. Ergo, the decision of the Ld. CIT(A) is hereby affirmed. Disallowance of over head expenditure - addition allowed by CIT(A) - HELD THAT:- We find that identical issue came up in assessee s own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 32(l)(iia) of the Act and recomputed the deprecation of Rs 611,23,45,284 after giving effect to Assessment order of AY 2014-15 despite the Appellant had not claimed the additional deprecation in Income Tax Return of the AY 2015-16. 1.1. That on the facts and circumstances of the case in law, the Ld. CIT(A) erred in confirming Ld. AO s allegation that the claim of additional depreciation was to be mandatorily allowed in terms of Explanation 5 to section 32(1) of the Act, without appreciating that additional depreciation being optional in nature, is not covered within the purview of the said Explanation. 1.2. That on the facts and circumstances of the case in law, the Ld CIT(A) erred in not appreciating that the additional depreciation, provided under Section 32(1)(iia) of the Act is in the nature of an incentive and cannot, therefore, be treated at par with normal depreciation . ITA No. 9492/Del/2019 (A.Y. 2016-17) (Assessee s appeal): 1. That on the facts and circumstances of the case in law, the Ld. CIT(A) erred in confirming action of Ld. AO in allowing claim of additional depreciation under section 32(l)(iia) of the Act and recompute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lock. The same has been disallowed by the AO as these were all estimated basis without any evidence to support the same. 4. The appellant craves to add, amend, modify or alter any grounds of appeal at any time or before the hearing of the appeal. ITA No. 8984/Del/2019 (A.Y. 2016-17) (Revenue s appeal): 1. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the exploration and development expenditure of Rs. 550,89,93,076/- which had been disallowed by the AO on the ground that the assessee company during the relevant previous year has contravened the provision of chapter XVII-B read with section 40a(i) and 40a(ia) of the Income Tax Act, 1961 and these expenses were also found unascertainable unverifiable by the assessing officer. Further the said expenditure has not been approved by the Management Committee (MC) which is also in contravention to the production sharing contract (PSC). 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the total time cost and expenses recharged by the operator to the Unincorporated Joint Venture (UJV) amounting to Rs. 129,83,85,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Vs. The Plantation Corporation of Kerala Ltd AIR 2000 SC 3714, M/s. Patel Roadways Ltd. vs. M/s. Prasad Trading Co AIR 1992 SC 1514) and Mohanlal Hargovinddas vs. State of M.P. AIR 1967 SC 1022/ to stress on the relevance of positioning of explanation. 31. The Id. CIT(A) held that a general rule, the explanations incorporated in the Income tax act specifically provide that a particular explanation applies to a 'section' or sub-section or clause . Therefore, there is no ambiguity in the applicability of a particular explanation in the act. 32. Explanation 5 specifically mentions that it is applicable for the 'sub-section'. The 'sub-section' in this case is 'sub-section' 1 of section 32 of the Act. The scheme of the Act clearly lays out that a sub-clause falls under a clause and a clause falls under a sub-section and further, sub-section falls under section. Therefore, the explanation 5 which is applicable for the sub-section will be applicable for all clauses and sub clauses of the said sub-section. Since 'clause (iia)' falls under 'sub-section 1' of 'section 32', there is no doubt regarding applicability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, inter alia, observing as under: 39. Heard the arguments of both the parties and perused the material available on record. 40. With regard to non-deduction of TDS on the expenditure charged to P L account, we hold that, - The assessee has a Participating Interest (PI) in the unincorporated joint-venture. - The business of prospecting and exploration of mineral oil in India could be done only by the way of Production Sharing Contracts (PSC) with Government of India. - ONGC is one part of the PSC on behalf of the Government of India. - The assessee (CEHL) acquired 50% participating interest in exploration, development and production of oil and natural gas in the contract area RJ (the block) with the approval of the Government of India. - ONGC and Cairn Energy India Pvt. Ltd. (CEIL) are the other partners in the block. - CEIL is the operator of this contract area. - CEIL holds 35%, CEHL holds 35% and ONGC holds 30% interest during the development and production stage. - As per the Article 1.4.4 Appendix C of PSC and in terms of the aforesaid Articles, the operator namely CEIL is required to maintain, on behalf of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II of the Act. - During AY under consideration, commercial production has commenced, therefore, even under provisions of IT Act, exploration and development expenses becomes allowable during AY under consideration. - The Id. CIT(A) has categorically held that the assessee (CEHL) has furnished tax audit report of the operator CEIL perusal of which shows that TDS requirement have been duly complied with the operator. hence, the disallowance made by the AO on account of exploration development expenditure per se and on account of infraction of provisions of Section 40(a)(ia) of the Income Tax Act, 1961 are liable to be deleted. The order of the Id. CIT(A) on this ground is affirmed. 11. The order of the learned CIT(A) for the assessment years under consideration being in consonance with the decision of the Coordinate Bench of the Tribunal, we see no reason to interfere with the same. Accordingly, order of learned CIT(A) for A.Ys. 2015-16 2016-17 on the issue in question is affirmed. Ground No. 1 taken by the Revenue in its appeals for A.Ys. 2015-16 2016-17 stand dismissed. 12. Ground no. 2 taken by the Revenue for both the assessment years in question relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in Revenue s appeals in assessee s own case for A.Ys. 2010-11, 2013-14 and 201415 wherein the Coordinate Bench vide its order dated 31.01.2023 rendered in ITA Nos. 6357/Del/2013; and ITA Nos. 5988 5989/Del/2018 for assessment years 2010-11, 2013-14 2014-15 respectively, affirmed the CIT(A) s order in allowed the assessee s claim of overhead expenditure, inter alia, by observing as under: 60. It was argued that the assessee would qualify for head office expenditure, on the grounds that, - that section 44C of the Act begins with a non obstante clause; - it restricts deduction to least of two parameters mentioned in clauses (a) and (c) of section 44C of the Act and in the absence of any one out of the two prescribed parameters, the entire section becomes non-workable. Consequently, the Assessee would become entitled to full deduction under section 37(1) of the Act in respect of its head office expenses. - CIT v. Deutsche Bank A.G. [(20oy) Taxman 37 (Bom.)] 61. We find that the Ld. CIT(A) in his order for AY 2010- 11 has allowed these expenses by holding as under: (a) It is seen that then CIT(A) in his appellate order for AY 2004-05 and subse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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