SECTION 80-IB(9): EACH OIL WELL TREATED AS A SEPARATE UNDERTAKING
ISSUE
Whether each oil well operated by an assessee engaged in oil exploration under a Production Sharing Contract (PSC) constitutes a separate “undertaking” eligible for deduction under Section 80-IB(9), or if all wells under a single contract must be aggregated as one undertaking.
FACTS
Business: The assessee is engaged in oil exploration and production under a Production Sharing Contract (PSC).
The Claim: For Assessment Years 2017-18 to 2019-20, the assessee claimed deduction under Section 80-IB(9) treating each oil well as a separate undertaking.
AO’s Action: The Assessing Officer (AO) disallowed the deduction, arguing that the explanation to Section 80-IB(9) implies that the entire block/contract area is a single undertaking.
Precedent: In the assessee’s own case for earlier years, the High Court had ruled that the explanation to Section 80-IB(9) is not retrospective and that each well is a distinct undertaking.
DECISION
Separate Undertaking: Following the precedent set by the High Court in the assessee’s own case, the Tribunal held that each oil well functions independently and constitutes a separate undertaking.
No Retrospectivity: The Explanation to Section 80-IB(9) (which sought to define “undertaking” as the entire block) applies prospectively and cannot be used to deny claims for years prior to its effective date or where the definition was different at the time of commencement.
Verdict: The deduction was allowed for each well separately. [In Favour of Assessee]
II. DEPRECIATION ON GOODWILL & 60% RATE FOR MINERAL OIL MACHINERY
ISSUE
Whether depreciation under Section 32 is allowable on “Goodwill” paid for acquiring commercial rights in a joint venture.
Whether plant and machinery used in mineral oil extraction is eligible for a higher depreciation rate of 60%.
Whether extraction of mineral oil qualifies as “manufacture or production,” entitling the assessee to Additional Depreciation under Section 32(1)(iia).
FACTS
Goodwill: The assessee acquired participating interest in a joint venture and paid goodwill for commercial rights.
Machinery: The assessee used plant and machinery for the business of extraction/production of mineral oil.
AO’s Action: The AO disallowed depreciation on goodwill and likely restricted depreciation on machinery to the general rate (15%), also denying additional depreciation.
DECISION
Goodwill: Relying on the Supreme Court ruling in Smifs Securities (and the Tribunal’s order in earlier years), depreciation on goodwill (acquired commercial rights) is allowable. (Note: This position has changed for AY 2021-22 onwards, but applies for the subject years).
60% Rate: Entry No. III(8)(xii) of Appendix I to the Income-tax Rules specifically prescribes a 60% depreciation rate for plant and machinery used in mineral oil extraction. The assessee is entitled to this specific rate.
Additional Depreciation: The extraction of mineral oil is considered akin to the “production of an article or thing.” Therefore, the assessee is an industrial undertaking eligible for Additional Depreciation under Section 32(1)(iia).
Verdict: [In Favour of Assessee]
III. DISALLOWANCE OF DONATION TO BOGUS SCIENTIFIC RESEARCH INSTITUTE
ISSUE
Whether the Assessing Officer was right in disallowing the weighted deduction under Section 35(1)(ii) for a donation made to a scientific research institute identified as “bogus” by a CBDT advisory.
Whether such a disallowed donation can alternatively be claimed as a “Business Loss” under Section 28(i).
FACTS
The Donation: The assessee contributed a sum to an institute of applied scientific research (trust) and claimed weighted deduction under Section 35(1)(ii).
The Advisory: The AO and DRP relied on a CBDT advisory listing bogus donations. It was noted that the recipient institute did not have valid approval to accept donations during the relevant period.
Alternative Plea: The assessee argued that if denied under Section 35, it should be allowed as a business loss/expenditure.
DECISION
Section 35 Denied: Since the recipient trust lacked valid approval and was flagged for bogus activities, the primary condition for Section 35(1)(ii) was not met. The disallowance was upheld.
Not a Business Loss: The Tribunal held that a “donation” to a non-approved trust is not an expenditure incurred “wholly and exclusively” for the purpose of business. It is an application of income, not a charge on profits. Therefore, it cannot be allowed as a business loss under Section 28.
Verdict: [In Favour of Revenue]
IV. TRANSFER PRICING: HEAD OFFICE OVERHEAD CHARGES ALLOWED AS PER PSC
ISSUE
Whether the Transfer Pricing Officer (TPO) was justified in determining the Arm’s Length Price (ALP) of Head Office (HO) overhead charges at Nil, alleging they were duplicative, when the Production Sharing Contract (PSC) explicitly allowed for a 1% overhead charge.
FACTS
The Charge: The assessee claimed 1% of the total contract cost as overhead charges payable to its Head Office (HO) as per the Production Sharing Contract (PSC) awarded by the Government of India.
TPO’s View: The TPO determined the ALP at Nil, arguing that these charges did not represent actual expenditure and resulted in “double reimbursement” (overlapping with other specific HO expenses).
Assessee’s Defense: The records showed that the specific 1% charge covered financial, legal, and employee relation services (manuals, journals) which were not included in the other specific expenses allocated by the HO.
DECISION
Contractual Basis: The PSC, a contract with the Government, specifically provided for this 1% overhead allocation.
Distinct Nature: The Tribunal found that the expenses covered by this 1% charge were distinct from other allocated costs. There was no duplication.
Commercial Expediency: The TPO cannot question the commercial wisdom of a contractual payment unless the transaction is a sham. Since the payment was consistent with the PSC and distinct in nature, the Nil ALP was unjustified.
Verdict: The addition was deleted. [In Favour of Assessee]
Key Takeaways
1. Oil & Gas Taxation:
Undertaking: Every well is a factory. Don’t let the AO group them if it hurts your 80-IB claim.
Depreciation: Remember the 60% rate for mineral oil machinery. It’s a huge cash flow benefit often missed.
2. Bogus Donations:
The Department maintains a specific list of “bogus” research institutes (often used for tax evasion). If your donation recipient lands on this list, both the Section 35 deduction and the general business expense claim will be denied. “Good faith” is rarely a defense here.
3. Goodwill Depreciation (Pre-2021):
For assessment years prior to AY 2021-22, depreciation on goodwill is a settled benefit. For years starting April 1, 2020 (AY 2021-22), the Finance Act 2021 expressly prohibits it.
IN THE ITAT AHMEDABAD BENCH ‘D’
Joshi Technologies International Inc India Projects
v.
ACIT (Intl Taxn)*
DR. BRR KUMAR, Vice President
and Ms. Suchitra Kamble, Judicial Member
and Ms. Suchitra Kamble, Judicial Member
IT Appeal Nos. 80, 81 & 244 (Ahd) of 2022
[Assessment years 2017-18, 2018-19 and 2019-20]
[Assessment years 2017-18, 2018-19 and 2019-20]
DECEMBER 12, 2025
Vishal Kalra, A.R. for the Appellant. Sher Singh, CIT-D.R. for the Respondent.
ORDER
Suchitra Kamble, Judicial Member.- These three appeals filed are against the order dated 04-022022 & 28-04-2022 passed by ACIT (Int. Taxn)-1, for assessment years 2017-18, 2018-19 & 2019-20.
2. The grounds of appeals are as under:-
ITA No. 80/Ahd/2022 A.Y. 2017-18
“Your Appellant being dissatisfied with the order passed by the Assistant Commissioner of Income Tax, Circle (Int. Taxn. 1), Ahmedabad (hereafter referred to as “AO”), u/s. 143(3) r.w.s. 92CA r.w.s. 144C(13) of the Income Tax Act (“the Act”) presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other.
1. The order passed by the Assessing officer w/s 143(3) in pursuance of the order of Dispute Resolution Panel us 144C, is erroneous and requires to be modified it is submitted that it be so held now.
2. The learned AO erred in disallowing claim of deduction u/s. 80IB(9) 11,7187,247/- without taking proper cognizance of the order of the Gujarat High Court and not following the same on the ground that Department has filed appeal to the Supreme Court is submitted it be so held now.
2.1 The learned AO has erred in stating that amended Explanation to 80IB(9) can be applied prospectively from FY 2009-10 without appreciating that Gujarat High Court has struck down the Explanation in appellant’s own case. It is submitted it be so held now.
2.2 The learned AO ought to have granted benefit u/s 80IB(9) in respect of oil wells considering them as separate undertaking as claimed by the appellant as it fulfills all the requirements of that section to be eligible to get such deduction, it is submitted that it be so held now.
2.3 The learned AO ought to grant deductions 801B(9) without set off of brought forward loss since those losses are already absorbed against the profits of company in earlier years, it is submitted that it be so held now.
2.4 The learned AO, without enquiring appellant to furnish any details in assessment proceedings, erred in stating that the commencement of commercial production for each well was not certified by any regulatory agency without appreciating that there is no such legal requirement. It is submitted it be so held now.
2.5 The learned AO erred in referring to provisions of section 80IA(8) and 80IA(10) even though the same are not applicable. It is submitted it be so held now.
2.6 The learned AO, without requiring appellant to furnish any details in assessment proceedings, erred in observing that apportionment of expenses has been done on mechanical basis & no actual expenses are accounted on wells, it is submitted that the actual expenses are charged to each well as incurred and common expenses are allocated on the basis of production ratio. It is submitted it be so held now.
3. The learned AO erred in law by not allowing depreciation of Rs. 80,739/- on amount paid in AY 2004-05 for acquiring participating interest in Joint Venture termed as ‘goodwill) which is business or commercial right of similar nature as envisaged u/s 32 of the Act, to keep the issue alive since the department is in appeal before ITAT, It is submitted it be so held now.
3.1 The learned AO erred in not appreciate the fact that no payment made during the year nor any right is acquired during the year and therefore following the blocs of asset principle the deprecation should be allowed on Opening Written Down Value of the Block of Asset as claimed by the appellant. It is submitted it be so held now.
4. The learned AO erred in not allowing depreciation on oil well and field equipment at her rate of 60% applicable for mineral oil concerns as per Appendix 1 to the Income Tax Rules, 1962. It is submitted it be so held now.
4.1 The learned AO has erred in not taking proper cognizance of the decision of Ahmedabad ITAT in appellant’s case and decision of the Gujarat High Court in case of Niko Resources on the ground that Department has not accepted said decisions. The learned AO ought to have appreciated that Tribunal’s decision in appellant’s own case is accepted by the Department and Department’s appeal before Supreme Court in case of Resources has been dismissed. It is submitted it be so held now.
4.2 Without prejudice to the above in the assessment order, the AO erred in granting depreciation of Rs 1,50,58,654/- instead of correct depreciation of Rs. 15,78,62,118/
5. The AO has erred in not granting additional depreciation on the addition to oil well and oil field equipment on ground of maintaining consistency with earlier years, it is submitted it be so held now.
6. The learned AO erred in law and facts in disallowing claim of weighted deduction of Rs. 70,00,000/- relying on CBDT advisory for claim of bogus donations, it be so held now.
6.1 The learned AO has erred in law and in facts in not appreciating that the donation was given by the appellant based on the notarized approval of registration u/s 35(1(ii) of the Act given by the trust and appellant had no reason to disbelieve the operation of approval and notification of the trust it be so held now.
6.2 Without prejudice to the above, the appellant ought to be granted deduction of amount paid to the trust of Rs 40,00,000 as business loss u/s 28 of the Act. It is submitted it be so held now.
7. The Ld. AO/TPO erred in law and on facts, in making an upward adjustment of Rs. 35,19,439 to the total income of the Appellant in respect of international transaction of allocation of General and Administrative (“G&A”) costs permissible as per Production Sharing Contracts (PSC) by determining the arm’s length price (ALP) of the international transaction as Nil.
7.1 The Ld. AO/TPO endorsed that the PSC is a self-serving document but erred in not allowing the expenses which were restricted in PSC to 1% of the total contract cost on the ground that cost benefit analysis was not done. It is submitted that prescribing 1% of contract cost in PSC satisfies cost benefit analysis and no separate satisfaction is required. It is submitted it be so held now.
7.2 The Ld. AO/TPO erred in law and on facts in arbitrarily referring that the costs incurred by Joint Venture (V) are allocated to the Appellant through the Head Office, without appreciating the fact that there is no JV in case of the Appellant.
7.3 The Ld. AO/TPO erred in law and on facts, in alleging that the expenditure of 1% of the total contract cost claimed by the Appellant as per the provisions of PSC does not represent actual expenditure
7.4 The Ld. AO/TPO erred in law and on facts, in regarding the submission of appellant that the expenses as per PSC does not form part of HO allocation of common general and administrative costs.
7.5 The Ld. AO/TPO erred in law and on facts, in making addition of Rs. 15,19,419/- on ground that assessee has made claim of same type of expenses under two different heads each bring under HO expenses and being as per PSC. It is submitted it be so held now.
7.6 The Ld. AO/TPO erred in law and on facts, in alleging that the expenses as per PSC have already been claimed by the Appellant under the allocation of HO expenses under section 44 of the Act and the allowance of expenses as per PSC would amount to double reimbursement to HO.
7.6 Without prejudice to the above, the Ld. AO/TPO failed to appreciate that out of the total HO expenditure of Rs. 555,31,914/ only Rs. 226,13,981/-could be claimed due to restrictions u/s 44C of the Act and thus Rs. 1,29,17,933/-(555,31,914/- less 2,26,11,981/-) were unclaimed which is much higher than eligible claim of 1% of contract cost as per PSC which works out to Rs. 35,19,433/-. In view of this, no disallowance was warranted it be so held now.
8. The learned AO has erred in fact and in law in not allowing set off of brought forward MAT credit u/s. 115JAA of the Act as per return as claimed by the appellant, it is submitted that it be so held now.
8.1. The learned AO erred in not appreciating that the assessment orders for Ay 2016-17, to which MAT credit pertains, is in appeal and the disputed issues have not reached finality. It is submitted that it be so held now.
9. The learned AO has erred in granting short credit of tax deducted at source of Rs. 56,56,881/- in the assessment order. It is submitted it be so held now.
10. The learned AO has erred in charging excess interest u/s 234B of the Act.
Your appellant prays for leave to add to alter and/or to amend any of the grounds before the final hearing of the appeal.”
ITA No. 81/Ahd/2022 A.Y. 2018-19
“Your Appellant being dissatisfied with the order passed by the Assistant Commissioner of Income Tax, Circle Intl Taxn 1), Ahmedabad (hereinafter referred to as “AO”), u/s 143(3) rws 144C(13) of the Income Tax Act (“the Act presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other.
1. The order passed by the Assessing officer u/s 143(3), in pursuance of the order of Dispute Resolution Panel u/s 144C, is erroneous and requires to be modified. It is submitted that it be so held now.
2. The learned AO erred in disallowing claim of deduction u/s 80IB(9) of Rs. 12,72,67,825/- without taking proper cognizance of the order of the Gujarat High Court and not following the same on the ground that Department has filed appeal to the Supreme Court. It is submitted it be so held now.
2.1 The learned AO has erred in stating that amended Explanation to 80IB(9) can be applied prospectively from FY 2009-10 without appreciating that Gujarat High Court has struck down the Explanation in appellant’s own case. It is submitted it be so held now.
2.2 The learned AO ought to have granted benefit u/s 80IB(9) in respect of oil wells considering them as separate undertaking as claimed by the appellant as it fulfills all the requirements of that section to be eligible to get such deduction. It is submitted that it be so held now.
2.3 The learned AO ought to grant deduction u/s 80IB(9) without set off of brought forward loss since those losses are already absorbed against the profits of company in earlier years. It is submitted that it be so held now.
2.4 The learned AO, without enquiring appellant to furnish any details in assessment proceedings, erred in stating that the commencement of commercial production for each well was not certified by any regulatory agency without appreciating that there is no such legal requirement, it is submitted it be so held now.
2.5 The learned AO erred in referring to provisions of section 801A(8) and 801A(10) even though the same are not applicable. It is submitted it be so held now.
2.6 The learned AO, without requiring appellant to furnish any details in assessment proceedings, erred in observing that apportionment of expenses has been done on mechanical basis & no actual expenses are accounted on wells. It is submitted that the actual expenses are charged to each well as incurred and common expenses are allocated on the basis of production ratio. It is submitted it be so held now.
3. The learned AO erred in law by not allowing depreciation of Rs. 60,555/-on amount paid in AY 2004-05 for acquiring participating interest in Joint Venture (termed as ‘goodwill) which is business or commercial right of similar nature as envisaged u/s 32 of the Act, to keep the issue alive since the department is in appeal before ITAT. It is submitted it be so held now.
3.1. The learned AO erred in not appreciating the fact that payment was made during the year nor any right acquired during the year and therefore the principle the depreciation should be allowed on Opening Written Down Value of the block of Asset as claimed by the appellant. It is submitted it be so held now.
4. The learned AO erred in not allowing depreciation on oil well field and equipment at higher rate of applicable for mineral oil concerns as per Appendix I to the Income Tax Rules, 1962. It is submitted it be so held now.
4.1 The learned AO has erred in not taking proper cognizance of the decision of Ahmedabad ITAT in appellant’s own case and decision of the Gujarat High Court in case of Niku Resources on the ground that Department has not accepted said decisions. The learned AO ought to have appreciated that Tribunal’s decision in own case is accepted by the Department and Department’s appeal before Supreme Court in case of Niko Resources has been dismissed. It is submitted it be held now.
4.2 Without prejudice to the above, in the assessment order. AO erred in granting depreciation of 1,97,85,366/- instead of correct depreciation of Rs. 14,83,36,988/
5. The AO has erred in not granting additional depreciation on the addition to oil well and oil field equipment on ground of maintaining consistency with earlier years. It is submitted it be so held now.
6. The learned AO erred in law and facts in disallowing claim of weighted deduction of Rs. 3,15,00,000/- relying on CBDT advisory for claim of bogus donations, it be so held now.
6.1 The learned AO has erred in law and in facts in not appreciating that the donation was given by the appellant based on the notarized approval of registration u/s. 35(1) (ii) of the Act given by the trust and appellant had no reason to disbelieve the operation of approval and notification of the trust. It be so held now.
6.2 Without prejudice to the above, the appellant ought to have granted deduction of amount paid to the trust of Rs. 2,10,00,000/- in bona fide belief as business loss u/s 28 of the Act. It is submitted it be so held now
7. The learned AO has erred in charging excess interest u/s. 234D of the Act.
Your appellant prays for leave to add to alter and/or to amend any of the grounds before the final hearing of the appeal.”
ITA No. 244/Ahd/2022 A.Y. 2019-20
“Your Appellant being dissatisfied with the order passed by the Assistant Commissioner of Income Tax, Circle (Int. Taxn 1) Ahmedabad (hereinafter referred to as “AO”) u/s. 144(3) r.w.s. 144C of the Income Tax Act (“the Act”), presents this appeal against the same on the following amongst other grounds of appeal which are without prejudice to each other.
1. The order passed by the Assessing officer u/s 143(3), in pursuance of the order of Dispute Resolution Panel u/s 144C, is erroneous and requires to be modified. It is submitted that it be so held now.
2. The learned AO erred in disallowing claim of deduction u/s 80IB(9) of Rs. 9,00,00,350/- without taking proper cognizance of the order of the Gujarat High Court and not following the same on the ground that Department has filed appeal to the Supreme Court. It is submitted it be so held now.
2.1 The learned AO has erred in stating that amended Explanation to 80IB(9) can be applied prospectively from FY 2009-10 without appreciating that Gujarat High Court has struck down the Explanation in appellant’s own case. It is submitted it be so held now.
2.2 The learned AO ought to have granted benefit u/s 801B(9) in respect of oil wells considering them as separate undertaking as claimed by the appellant as it fulfills all the requirements of that section to be eligible to get such deduction. It is submitted that it be so held now.
2.3 The learned AO ought to have grant deduction u/s. 801B(9) without set off of brought forward loss since those losses are already absorbed against the profits of company in earlier years. It is submitted that it be so held now.
2.4 The learned AO erred in holding that the commencement of commercial production for each well was not certified by any regulatory agency without calling for data & appreciating that there is no such legal requirement. It is submitted it be so held now.
2.5 The learned AO erred in referring to provisions of section 801A(8) and 801A(10) even though the same are not applicable. It is submitted it be so held now.
2.6 Without calling for data the learned AO erred in holding that there is mechanical apportionment of expenses & no actual expenses are accounted on wells. It is submitted that the actual expenses are charged to each well and only common expenses are allocated on the basis of production ratio. It is submitted it be so held now.
3 The learned AO erred in law by not allowing depreciation of Rs. 45,416/ on amount paid in AY 2004-05 for acquiring participating interest in Joint Venture (termed as goodwill) which is business of commercial right of similar nature as envisaged u/s 32 of the Act, to keep the issue alive since the department is in appeal before ITAT. It is submitted it be so held now.
3.1 The learned AO erred in not appreciating the fact that no payment was made during the year, nor any right is acquired during the year and therefore following the block of asset principle, the depreciation should be allowed on Opening Written Down Value of the Block of Asset as claimed by the appellant. It is submitted it be so held now.
4. The learned AO erred in not granting depreciation on oil well and oil field equipment at higher rate of 40% applicable for mineral oil concerns. It is submitted it be so held now.
4.1 The learned AO has erred in net appreciating that the Tribunal’s decision in appellant’s own case is accepted by the Department and Department’s appeal before Supreme Court in case of Niko Resources has been dismissed. It is submitted it be held now.
4.2 Without prejudice to the above, in the assessment order, AO erred in granting depreciation of Rs. 3,97,71,406/- instead of correct depreciation of 15,67,82,419.
5. The AO has erred in not granting additional depreciation on the addition to oil well and oil field equipment on ground of maintaining constancy with earlier years. It is submitted it be so held now.
6. The learned AO erred in not granting deduction u/s 42 of the of the Act of Rs. 11,20,70,905/- as claimed It is submitted it be so held now.
6.1 The learned AO erred in not following directions of DRP and concluded that appellant is not eligible for deduction u/s 42 of the Act. It is submitted it be so held now.
6.2. Though directed by the Hon’ble DRP to quantify the deduction eligible u/s 42, the learned AO erred in deciding eligibility and concluded that appellant is not eligible for deduction u/s 42 of the Act. It is submitted it be so held now.
6.3 The learned AO erred in relying on Supreme Court decision in appellant’s own case for rejecting the claim u/s 42 disregarding the fact that the said decision is not applicable for year under reference as the Hon’ble DRP has dealt with the same and concluded that the applicant is eligible for deduction u/s 42.
7. The learned AO has erred in charging excess interest u/s 234B of the Act.
Your appellant prays for leave to add to alter and/or to amend any of the grounds before the final hearing of the appeal.”
3. We are taking up facts of assessment year 2017-18 being ITA No. 80/Ahd/2022. The assessee is involved in the business of oil exploration and production and heavy oil storage reservoirs. A tripartite Production Sharing Agreement was entered into between the Government of India, JTI USA & Larsen & Toubro Ltd. for exploration of oil. Subsequently in the year 2004, JTI USA acquired the stake of L&T in the PSC. The government awarded two oil fields (Dholka and Wavel) in the state of Gujarat for exploration and development to JTI USA. In order to manage Indian Operations, JTI USA setup a project office in Ahmedabad. The return of income was originally filed on 29.11.2017 declaring total income at Rs. 31,22,02,880/- after claiming deduction u/s. 801B(9) of Rs. 11,73,87,247/-. The statutory notices were issued and after verification of Form No. 3CEB, the Assessing Officer was noticed that the assessee company had entered into international transactions with its associated enterprises. After obtaining approval, the matter was referred to TPO for examining the TP Risk Parameter. The order u/s. 92CA(3) of the Act was passed on 30-01-2021. The assessment order was passed on 04-02-2022 thereby making following additions:-
| 1. | Deduction u/s SOIB as per para 4 | 11,73,87,247 | |
| 2. | Depreciation on P& M and Oil Well as per para 6 | 4,57,97,623 | |
| 3. | Depreciation on goodwill as per para 5 | 80,739 | |
| 4. | Additional Depreciation as per para 6 | 21,49,251 | 16,54,14,860 |
| 5. | Disallowance of Weighted Deduction as discussed in Para 7 | 70,00,000 | 70,00,000 |
| 6. | Adjustment on account of determination of ALP in respect of HO Expenses as discussed in para 8 | 35,19,439 | 35,19,439 |
| Assessed Total Income | 48,81,37,179 | ||
| Rounded off u/s. 288A | 48,81,37,180 | ||
| 7. | Book Profit as per 115JB | 48,81,37,180 |
Thus total income was passed at 48,81,37,180/-.
4. Being aggrieved by the assessment order, the assessee filed objection before the DRP. The DRP vide directions dated 28-01-2022 has directed the Assessing Officer to act accordingly.
5. The Ld. AR submitted that Ground No. 1 is general, hence the same is not adjudicated.
6. As regards Ground No. 2 (2.1 to 2.6) for Assessment Years 2017-18, 2018-19 and 2019-20, the Ld. AR submitted that the Assessing Officer made disallowance of deduction under Section 80IB(9) of the Income Tax Act. During the relevant assessment years, the assessee claimed deduction under Section 80IB(9) of the Act for separate wells with an understanding that each well represents separate undertaking, and therefore profit of each undertaking is eligible for deduction under Section 80IB(9) of the Act. The assessee has been claiming deduction under Section 80IB(9) of the Act on this basis for separate wells since A.Y. 2005-06. However, the Assessing Officer did not appreciate that Section 80IB of the Act does not mandate that for claiming deduction separate books of account should be maintained. The Ld. AR relied upon the decision of the Hon’ble Madras High Court in case of Cairn India Ltd. v. DIT (Madras) and decision of the Tribunal in case of ACIT v. Oil India Ltd. (Gauhati – Trib.)/[2019] 179 ITD 455 (Gauhati – Trib.). Moreover, the Assessing Officer has also not considered the submissions of the assessee during the assessment and merely denied deduction under Section 80IB(9) of the Act relying on reasoning provided in previous assessment order. The Ld. AR relied upon the decision of the Hon’ble Gujarat High Court in assessee’s own case (Special Civil Application No. 1171 of 2010) which followed the case of Niko Resources Ltd. v. UOI ITR 369 (Gujarat). The Hon’ble High Court denied retrospective applicability of explanation to Section 80IB(9) of the Act stating that all blocks licensed under a single contract cannot be treated as a single undertaking. The Ld. AR further submitted that the Assessing Officer did not follow the decision of the Tribunal in assessee’s own case for A.Y. 2005-06 bearing ITA No. 3988/Ahd/2008, wherein it was held that:
“17.1 In view of the above, we hold that each well maintained by the assessee represents the separate undertaking and therefore the profit of each undertaking is eligible for deduction under Section 80IB(9) of the Act.”
The applicability of Section 80IB(9) of the Act to assessee’s case is affirmed by the following decisions in assessee’s own case:
| (i) | ITAT Order dated 21.12.2019 A.Y. 2005-06 ITA No. 3988/Ahd/2008 para 9 to 17.3 |
| (ii)The | Bhildi Mercantile Credit Co-op. Soc. Ltd. v. Asstt. CIT [IT Appeal No. 2398/Ahd/201526, dated 26-11-2015] para 12 to 17.1 |
| (iii) | Joshi Technologies International Inc. v. ADIT.(INTNL.TAXN.) [IT Appeal Nos. 3195 & 3456/Ahd/2010, dated 19-05-2023] |
| (iv) | ITAT Order dated 19.05.2023 A.Y. 2008-09 ITA No. 3195/Ahd/2011 para 44 |
| (v) | Joshi Technologies International Inc. India Projects v. Dy. DIT (Intl. Tax) [IT Appeal Nos. 766 & 767 /Ahd/2014, dated 27.10.2023] (MA Order dated 24.01.2025 paras 1 to 3) |
| (vi) | ITAT Order dated 27.10.2023 A.Y. 2010-11 ITA NO. 766/Ahd/2014 para 46 |
| (vii)) | ITAT Order dated 27.10.2023 A.Y. 2011-12 ITA No. 242/Ahd/2012 para 64 |
The Ld. AR further submitted that the assessee has filed Form 8 dated 24.05.2024 under Section 158A of the Act stating that the question of law regarding Section 80IB of the Act is pending adjudication before the Hon’ble Supreme Court. The Department vide report dated 14.06.2024 has accepted this. Accordingly, the Ld. AR prayed that the Assessing Officer be specifically directed to take cognizance of order of Hon’ble Gujarat High court/Hon’ble Supreme Court and grant deduction under Section 80IB of the Act.
7. The Ld. DR relied upon the Assessment order and the order of the CIT(A). But could not dispute that the facts of these three assessment years present before the Tribunal are identical to that of the earlier assessment years wherein the Hon’ble Gujarat High Court and the Tribunal has decided this issue in favour of the assessee.
8. We have heard both the parties and perused all the relevant material on the record. It is pertinent to note that the facts of the A.Y. 2017-18, 2018-19 and 2019-20 for this issue of disallowance of deduction under Section 80IB(9) of the Act is identical to that of earlier Assessment Years 2005-06 to 2011-12. The Tribunal categorically held that each well maintained by the assessee company represents the separate undertaking and therefore the profit of each undertaking is eligible for deduction under Section 80IB(9) of the Income Tax Act, 1961. Further the Hon’ble Gujarat High court in assessee’s own case categorically discarded the retrospective applicability of explanation to Section 80IB(9) of the Act stating that all blocks licensed under a single contract cannot be treated as a single undertaking. These factual aspects were not disputed by the Ld. DR in the present Assessment Years as well. Thus, Ground No. 2, 2.1 to 2.6 are allowed.
9. As regards to Ground No. 3 and 3.1 relating to disallowance on depreciation of goodwill under Section 32 of the Act, the Ld. AR submitted that participating interest of L&T in JV were transferred to assessee vide agreement dated 02.04.2002. The amount so paid in excess of consideration over the net identifiable fixed assets to acquire commercial right was recognized as “Goodwill” and depreciation on goodwill was claimed and allowed in previous years. In the present Assessment Year, the assessee has claimed depreciation on goodwill at the rate of 25% i.e. Rs. 80,739/-. The Ld. AR relied upon the following decisions:
| (i) | CIT v. Smifs Securities Ltd. ITR 302 (SC) |
| (ii) | ITAT order dated 19.05.2023 in assessee’s own case for A.Y. 2007-08 ]/ITA No. 3456/Ahd/2010 para 37-38 |
| (iii) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2009-10 in ]/ITA No. 767/Ahd/2014 para 15-16 |
| (iv) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2010-11 in ITA No. 766/Ahd/2014 para 47 |
| (v) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2011-12 in ITA No. 242/Ahd/2015 para 67 |
The Ld. AR submitted that since the facts of the present assessment years are same as in the earlier assessment years, the assessee prayed that the similar direction in the present assessment year be given.
10. The Ld. DR relied upon the Assessment order and the order of the CIT(A). But could not dispute that the facts of these three assessment years present before the Tribunal are identical to that of the earlier assessment years wherein the Tribunal has decided this issue in favour of the assessee and directed the Assessing Officer accordingly.
11. We have heard both the parties and perused all the relevant material on the record. It is pertinent to note that the facts of the A.Y. 2017-18, 2018-19 and 2019-20 for this issue of disallowance on deprecation of goodwill under Section 32 of the Act is identical to that of earlier Assessment Years 2005-06 to 2011-12. No distinguishing facts were pointed out by the Ld. DR, hence the Assessing Officer is directed to allow the depreciation on goodwill under Section 32 of the Act. Ground No. 3 and 3.1 are allowed.
12. As regards to Ground No. 4 and 4.1, the disallowance of depreciation on oil will and oil field at higher rate of 60% as per Appendix I to the Rules, the Ld. AR submitted that the assessee is engaged in the business of extraction/production of mineral oil and entitled to depreciation at the rate of 60% as prescribed for Entry No. III(8)(xii) of Appendix I to the Income Tax Rules, 1962 on plant and machinery used in business of extraction of mineral oil. The Ld. AR relied upon the following decisions:
| (i) | Assessee’s own case for A.Y. 2006-07 in Joshi Technologies International Inc. v. Asstt. CIT (International Taxation) [IT Appeal No. 2389/Ahd/2015, dated 17/08/2022] (para 19 to 26, 26.1) |
Department preferred appeal before the Hon’ble High Court and Hon’ble Supreme Court which were dismissed, upholding order of the Tribunal in favour of the assessee.
| (ii) | Niko Resoureces v. ACIT ITR 301 |
| (iii) | ITAT order dated 21.12.2019 in assessee’s own case for A.Y. 2001-02, 2002-03 and 2005-06 (ITA No. 904 & 905/Ahd/2009 and 3988/Ahd/2008 para 18.1 to 24) |
| (iv) | ITAT order dated 19.05.2023 in assessee’s own case for A.Y. 2007-08 /ITA No. 3456/Ahd/2010 para 8-9) |
| (v) | ITAT order dated 19.05.2023 in assessee’s own case for A.Y. 2008-09 (ITA No. 3195/Ahd/2011 para 43) |
| (vi) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2009-10 (ITA No. 766/Ahd/2014 para 7-9 and MA order dated 24.01.2025 para 8-10) |
| (vii) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2010-11 /ITA No. 767/Ahd/2014 para 45) |
| (viii) | ITAT order dated 27.10.2023 in assessee’s own case for A.Y. 2011-12 (ITA No. 242/Ahd/2015 para 65) |
Therefore, the Ld. AR submitted that this position has been settled in assessee’s favour by the Hon’ble Supreme Court and High Court and thus, not disputed by the Assessing Officer in subsequent years such as A.Y. 2022-23.
13. The Ld. DR relied upon the Assessment order and the order of the CIT(A). But could not dispute that the facts of these three assessment years present before the Tribunal are identical to that of the earlier assessment years wherein the Tribunal has decided this issue in favour of the assessee and directed the Assessing Officer accordingly. In fact in A.Y. 2006-07 this issue was considered by the Hon’ble Supreme Court in favour of the assessee in assessee’s own case.
14. We have heard both the parties and perused all the relevant material on the record. It is pertinent to note that the facts of the A.Y. 2017-18, 2018-19 and 2019-20 for this issue of disallowance on deprecation oil well and oil field at higher rate of 60% as per Appendix I to the Rules, has already been decided in assessee’s own case in previous years as well as more specifically confirmed by the Hon’ble Apex Court in A.Y. 2006-07 as well. These factual aspects were not disputed by the Ld. DR in the present Assessment Years as well. Thus, Ground No. 4 and 4.1 are allowed.
15. As regards to without prejudice ground No. 4.2, since Ground No. 4 and 4.1 are allowed becomes academic, hence dismissed.
16. As regards to Ground No. 5 related to whether the assessee is entitled to additional depreciation on the ground of maintaining consistency, the Ld. AR submitted that since extraction of mineral oil is akin to manufacture or production of article or thing, hence, the assessee is entitled to claim additional depreciation under Section 32(1)(iia) of the Act. Especially on the ground of maintaining consistency. The Ld. AR relied upon the following decisions in assessee’s own case:
| (i) | ITAT order dated 17.08.2022 for A.Y. 2006-07 [IT Appeal No. 2389/Ahd/2015, dated 17/08/2022]/ITA No. 2389/Ahd/2015 para 11-14.1 post MA order dated 23.03.2022 A.Y. 2006-07 – MA No. 149/2021 in [IT Appeal No. 2389/Ahd/2015, dated 17/08/2022]/ITA No. 2389/Ahd/2015 para 8 |
| (ii) | ITAT order dated 19.05.2023 A.Y. 2007-08 ITA 3456/Ahd/2010 para 10-11.2 |
| (iii) | ITAT order dated 19.05.2023 A.Y. 2008-09 ITA 3195/Ahd/2011 para 42-43 |
| (iv) | ITAT order dated 27.10.2023 A.Y. 2009-10 ITA 767/ahd/2014 para 9-10 MA order dated 24.01.2025 para 1112 |
| (v) | ITAT order dated 27.10.2023 A.Y. 2010-11 ITA No.766/Ahd/2014 para 53 |
| (vi) | ITAT order dated 27.10.2023 A.Y. 2011-12 ITA No. 242/Ahd/2015 para 65 |
17. The Ld. DR relied upon the Assessment order and the order of the CIT(A). But could not dispute that the facts of these three assessment years present before the Tribunal are identical to that of the earlier assessment years and the Tribunal has decided this issue in favour of the assessee.
18. We have heard both the parties and perused all the relevant material on the record. It is pertinent to note that the facts of the A.Y. 2017-18, 2018-19 and 2019-20 for this issue is identical to that of earlier Assessment Years 2006-07 to 2011-12. It is categorically mentioned in these decisions that since extraction of mineral oil is similar to manufacture or production of article or thing, hence, the assessee is entitled to claim additional depreciation under Section 32(1)(iia) of the Act. These factual aspects were not disputed by the Ld. DR in the present Assessment Years as well. Thus, Ground No. 5 is allowed.
19. As regards to Ground Nos. 6 and 6.1, disallowance of weighted deduction under Section 35 (1)(ii) of the Act, the Ld. AR submitted that the assessee made contribution of Rs. 40,00,000/- to Shri Arvindo Institute of applied Scientific Research (trust) during the assessment years 2017-18 and 2018-19. The payment receipt provided by trust demonstrated amount paid by account payee cheque, PAN of trust, trust registration number, main/registered office of trust, project for which donation to be applied and trust’s eligibility under Section 35(1)(ii) of the Act. The assessee claimed deduction on basis of the Notification dated 30.10.2016 which clearly stated that the above mentioned trust is covered under one time registration and no renewal is necessary. The DRP/AO, while disallowing the claim based on CBDT advisory, failed to bring on record any evidence to suggest that the donation made by the assessee was contrary to the provisions as per law, especially when the DRP has accepted that the assessee has suffered collateral damage. The Ld. AR relied on the following decisions:
| (i) | Pr. CIT v. Thakkar Govindbhai Ganpatlal (HUF) [Tax Appeal No. 881 of 2019, dated 20-1-2020] (Gujarat) |
| (ii) | S.G. Vat Care (P.) Ltd. v. ITO [IT Appeal No.1943/Ahd/2017, dated 15-1-2019] |
| (iii) | ACIT v. Armee Infotech ITD 728 (Ahmedabad – Trib.) |
The Ld. AR submitted that there is no evidence that the amount of expenditure incurred was received back by the assessee, unless the same can be proved, the said expenditure cannot be held to be bogus expenditure.
20. The Ld. DR submitted that the trust does not have approval for accepting such donations, following the CBDT advisory dated 14.12.2018. The Ld. DR also relied upon various decisions of the Ahmedabad Tribunal wherein the assessee’s contentions were categorically rejected as the trust does not have approval for accepting donations onwards. Thus, Ld. DR relied upon the order of the DRP/AO.
21. We have heard both the parties and perused all the relevant material on the record. It is admitted fact that Shri Arvindo Institute of applied Scientific Research Institute does not have approval as trust to accept the donations as per the CBDT advisory dated 14.12.2018 which was categorically known to the assessee. Therefore, DRP/AO rightly disallowed the claim of weighted deduction under Section 35(1)(ii) of the Act. The case laws referred by the Ld. AR does not apply in the facts of the present assessee’s case for A.Y. 2017-18 and 201819. Hence, Ground No. 6 and 6.1 are dismissed.
22. As regards to Ground No. 6.2, without prejudice to the Ground No. 6 and 6.1, the actual amount paid to the trust should be allowed as deduction under Section 28 of the Act for A.Y. 2017-18 and 201819, the Ld. AR submitted that the expenditure was incurred by the assessee under bonafide belief for development of scientific research and development. If the assessee is not allowed to claim weighted deduction under Section 35(1)(ii) of the Act the assessee should be allowed to claim loss of the amount actually expended by the assessee as a business loss under Section 28 of the Act. The Ld. AR relied upon the following decisions wherein it has been held that when an amount is held to be not deductible in view of non-compliance of condition provided under any other section, same could be considered as an allowable business loss:
| i. | Badridas Daga v. CIT [1958] 34 ITR 10 (SC) |
| ii. | Harshad J. Choksi v. CIT ITR 250 (Bombay) |
| iii. | CIT v. R. B. Rungta & Co. [1963] 50 ITR 233 (Bombay) |
23. The Ld. DR relied upon the order of the DRP/AO and submitted that the payment to non-recognized trust is not business loss.
24. We have heard both the parties and perused all the relevant material on the record. At one point the assessee states that the amount paid is to the non-registered/non-approved trust, and then take alternate plea that it is expenditure incurred on business. But the fact remained that the expenditure was not incurred in respect of business and the amount paid is to the non-approved trust. The case laws referred by the Ld. AR does not apply in the facts of the present assessee’s case for A.Y. 2017-18 and 2018-19. Therefore, Ground No. 6.2 is dismissed.
25. As regards Ground Nos. 7, 7.1 to 7.6 for A.Y. 2017-18 relating to addition made on account of ALP adjustment in respect of expenses allocated by HO to Project Office basis of Production Sharing Contract (PSC) amounting to Rs. 35,19,439/-, the Ld. AR submitted that the said issue of deduction of 1% of total contract costs as per para 2.6 of Section 2 of Appendix C to the Production Sharing Contract has been accepted by the Department in the past and in subsequent Assessment Years (A.Y. 2007-08 to 2016-17 and 2018-19 to 2019-20). It is an undisputed fact that the dispute only arose in this Assessment Year. The Ld. AR relied upon the following decisions wherein it has been held that the Assessing Officer cannot be allowed to change its stance when the same fundamental aspect permits in different assessment years:
| (i) | Radhasoami Satsang v. CIT ITR 321 (SC) |
| (ii) | CIT v. Excel Industries Ltd. ITR 295 (SC) |
| (iii) | DIT (Exemptions) v. Escorts Cardiac Diseases Hospital Society [2008] 300 ITR 75 (Delhi) |
| (iv) | Pr. CIT v. Shah Virchand Govanji Jewellers (P.) Ltd. (Gujarat)/TA No. 72, 73 & 74 of 2019 (Gujarat) |
| (v) | Prasad Multi Services (P.) Ltd. v. Dy. CIT ITR 542 (Gujarat) |
The assessee claimed following deductions for the administrative expenses incurred:
| (i) | The HO incurred various expenses on behalf of the assessee company, out of which, expenses qualifying within definition of ‘HO expenses’ as per explanation (iv) to Section 44C of the Act were allocated to the assessee (i.e. debited to P&L account as HO expenses) and balance expenses, being notional expenses did not fit within definition of ‘HO expenses’ were not allocated. The nature of these expenses are salaries and wages, health insurance costs for employees, payroll services, rent expense, telephone expenses and automotive expenses amounting to Rs. 2,26,13,981/- (i.e. 5% of the adjusted total income as per Section 44C of the Act). |
| (ii) | As per para 2.6 of Section 2 ‘Classification, Definition and Allocation of costs and Expenditure’ of the Appendix C ‘Accounting Procedure’ in the PSC, overhead charges for services rendered by company inside and outside India in relation to Dholka and Wavel oilfields were debited to Profit & loss account as G&A expenses. These expenses were not allocated to the assessee under ‘HO expenses’. The nature of these expenses are overhead charges as per PSC includes financial, legal, charges for manuals, journals, periodicals, relating to the oil industry and employee relation services. Therefore, these expenses were not covered within the ambit of ‘HO expenses’ under Section 44C of the Act. The said expenses incurred amounting to Rs. 35,19,439/- (i.e. 1% of total contract costs as per para 2.6 of Section 2 of Appendix C to the PSC). |
Thus, in light of the above, the Ld. AR submitted that it is clear that even though amount of Rs. 5.55 Crore was reported in the TP Study/Form 3CEB as international transaction, no occasion arises with the TPO to determine ALP on the notional expenses amounting to Rs. 35.19 lakhs claimed as deduction under Section 37 of the Act. Thus, expenditure amounting to Rs. 35.19 lakhs has been incurred by HO being part and parcel of PSC which are not cross charged to the assessee. Therefore, 1% of the contract amount claimed as overhead expenses does not amount to double reimbursement to HO. The Ld. AR relied upon the decision of the Hon’ble Supreme Court in case of CIT v. Enron Oil & Gas India Ltd. (SC) wherein it was held that PSC is a code in itself. Moreover, as per Article 15 read with Appendix D to PSC, the assessee company is subject to all fiscal legislations in India and provisions of the Act shall apply to computation of income of the assessee. Therefore, overhead charges incurred by HO and charged to P&L of the assessee can be said to be expenses incurred for purpose of business of appellant and should be allowable as deduction in computation of income under Section 37(1) of the Act. In the present case, the TPO has gone beyond his jurisdiction and erred in treating the ALP of these cost allocation to be Nil without identifying any method for ALP determination and comparable price. In his regard, reliance is placed on CBDT Instruction No. 3/2016 dated March 10, 2016 (F.No. 500/9/2015-APA-II) which clearly states that the role of the TPO is limited to determination of the ALP. The Ld. AR relied upon the following decisions wherein it has been held TPO can’t question the business decision of the assessee as his role is limited to determine the arm’s length price of the transaction:
| (i) | CIT, international Taxation v. A.T. Kearney Ltd. (Delhi) |
| (ii) | Avery Dennison (India) (P.) Ltd. v. ACIT [IT Appeal No. 4869, dated 4-12-2015] upheld by the Hon’ble Delhi High Court in ITA 386/2016 and followed in subsequent AYs |
| (iii) | Pr. CIT v. R.A.K. Ceramics India (P.) Ltd. (Andhra Pradesh) |
| (iv) | CIT v. Lever India Exports Ltd. (Bombay) |
| (v) | CIT v. EKL Appliances Ltd. ITR 241 (Delhi) |
| (vi) | Marathon Electric India (P.) Ltd. v. ACIT [IT Appeal No. 5257/Del/2011, dated 19-2-2020] |
| (vii) | Dy. CIT v. Rabo India Finance Ltd. ITD 420 (Mumbai – Trib.) |
| (viii) | Cadila Healthcare Ltd. v. Dy. CIT (Ahmedabad – Trib.) |
The Ld. AR also relied upon the following cases wherein it was categorically held that the TPO cannot hold the value of a transaction to be ‘Nil’:
| (i) | Lever India Exports Ltd. (supra) |
| (ii) | CIT v. Johnson & Johnson Ltd. (Bombay) |
| (iii) | Emerson Climate Technologies (India) Ltd. v. Dy. CIT (Pune – Trib.) |
Thus, the Ld. AR submitted that the approach of re-computing the ALP without identifying price of comparable uncontrolled transactions is unwarranted and ought to be rejected. Thus, the TPO/AO have not proceeded in consonance with the provisions of Section 92C of the Act, thereby making the adjustment on this account is completely devoid of merit. The Ld. AR relied upon the following decisions wherein it has been held that adjustment made against the mandate of Section 92C of the Act cannot be sustained:
| (i) | Frigoglass India (P) Ltd. v. DCIT (Delhi – Trib.) upheld by the Hon’ble Delhi High Court vide ITA No. 123/2017. SLP filed by the Revenue authorities has been dismissed by the Hon’ble Supreme Court vide SLP (civil) No. 41702/2017 |
| (ii) | Lever India Exports Ltd. (supra) |
| (iii) | Johnson & Johnson Ltd. (supra) |
| (iv) | Emerson Climate Technologies (India) Ltd. (supra) |
| Accordingly, | the Ld. AR prayed to direct the Assessing Officer to allow expenses claimed as annual overhead charge of Rs. 35,19,439/- as deduction under the Act. |
26. The Ld. DR submitted that the Assessing Officer/TPO held that the amount of 1% of cost is as per provisions of PSC and does not represent actual expenditure. This expenditure of 1% of total contract cost amounts to double reimbursement to HO. The DRP held that PSC is a self-serving document, but the addition was not justified by the assessee on the cost-benefit analysis.
27. We have heard both the parties and perused all the relevant material available on record. From the perusal of records, it can be seen that in the earlier assessment years i.e. in A.Y. 2007-08 to 201617 and also in subsequent assessment years i.e. in A.Y. 20118-19 and 2019-20, this issue of deduction of 1% of total contract costs as per para 2.6 of Section 2 of Appendix C to the production sharing contract has been accepted by the Revenue. It is pertinent to note that overhead charges that are financial, legal charges for manuals, journals, periodicals relating to oil industry and employee relation services are not included in Head Office expenses as per the records submitted by the assessee to the revenue authorities and thus, the AO/TPO was not right in making addition on account of ALP adjustment in respect of expenses allocated by HO to project office on basis of production sharing contract amounting to Rs. 35,19,439/-. Ground No. 7, 7.1 to 7.6 for A.Y. 2017-18 are allowed.
28. As regards to Ground No. 7.7 for A.Y. 2017-18, without prejudice the Assessing Officer failed to appreciate that the actual expenditure incurred by HO is significantly higher than the amount claimed under Section 44C of the Act, since Ground No. 7, 7.1 to 7.6 hereinabove are allowed, there is no need to adjudicate this Ground. Thus, Ground No. 7.7 for A.Y. 2017-18 is dismissed.
29. As regards to Ground No. 8 and 8.1 relating to Non-grant of MAT credit for A.Y. 2017-18, the Ld. AR submitted that in A.Y. 201617, the assessee had paid taxes as per MAT. However, while passing the Assessment Order for A.Y. 2016-17, the Assessing Officer made additions and re-computed the income as per normal provisions and the MAT credit was nullified in the income tax records. Thus, as the assessee has filed an appeal for A.Y. 2016-17 and the same is pending before the CIT(A), it is prayed that MAT credit likely to arise due to probable relief in A.Y. 2016-17 should be allowed consequentially.
30. The Ld. DR submitted that the Assessing Officer rightly restricted the tax credit to Rs. 12,31,07,391/- instead of Rs. 12,87,64,272/- claimed in return of income.
31. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has filed appeal before the CIT(A) for A.Y. 2016-17 and the same is pending. If the MAT credit arise due to relief in A.Y. 2016-17, then the Assessing Officer is directed to grant the same in this year as well after due verification. Thus, Ground No. 8 and 8.1 for A.Y. 2017-18 is partly allowed.
32. As regards to Ground No. 9 of A.Y. 2017-18 relating to short grant of tax credit amounting to Rs. 56,56,881/-, the Ld. AR submitted that the assessee claimed credit of tax deducted at source of Rs. 12,87,64,272/- in the return of income, which is also reflected in Form 26AS for the year under consideration, but the same was not fully granted. Thus, the Ld. AR prayed that adequate TDS credit should be granted as reflecting in Form 26AS.
33. The Ld. DR relied upon the assessment order.
34. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that credit of TDS which was reflected in Form 26AS has to be granted fully by the Assessing Officer. Therefore, the Assessing Officer is directed to grant entire credit which is reflected Form 26AS. Ground No. 9 of A.Y. 201718 is partly allowed.
35. As regards to Ground No. 7 of Assessment Year 2018-19, interest under Section 234D of the Act, the same is consequential, hence not adjudicated upon at this juncture.
36. As regards to Ground No. 6, 6.1 to 6.3 of A.Y. 2019-20 relating to granting of deduction under Section 42 of the Act amounting to Rs. 11,20,70,905/-, the Ld. AR submitted that despite the directions of the specific directions of the DRP, the Assessing Officer has not granted the said deduction. The Ld. AR submitted that the Assessing Officer failed to appreciate that decision of Goetze (India) Ltd. v. CIT ITR 323 (SC) only binds the ‘assessing authority’ but does not impinge upon the powers of the Appellate authorities such as Tribunal and DRP, to entertain new claims. In this regard the Ld. AR relied upon the following decisions:
| (i) | Wipro Finance Ltd. v. CIT ITR 250 (SC) |
| (ii) | Dy. CIT (OSD) v. Zydus Wellness Ltd. ITD 604 (Ahmedabad – Trib.) upheld by Hon’ble Gujarat High Court in Pr. CIT v. Zydus Wellness Ltd. (Gujarat) |
| (iii) | Riddhi Steel & Tubes (P.) Ltd. v. Asstt. CIT ITD 397 (Ahmedabad – Trib.) |
The Ld. AR further submitted that the DRP held that PSC is retrospective in nature and assessee is eligible for deduction under Section 42 of the Act. Thus, in light of clear finding of the DRP, Article 15.5 and 15.6 of the PSC effective from February 20, 2018 as well as it is evident that amount of Rs. 11,20,70,905/- ought to be eligible for deduction under Section 42 of the Act. The Ld. AR relied upon the decision of the Tribunal in case of ACIT v. Niko Resources Ltd. [2009] 123 TTJ 310 (Ahmedabad – Trib.) wherein it has been held that Section 42 of the Act allows deduction specified in the agreement entered into by the assessee with the Central Government. The Ld. AR submitted that the Assessing Officer ignored the detailed working and sample invoices given by the assessee during the assessment proceedings vide submissions dated 26.04.2022 in respect of deduction under Section 42 of the Act. Thus, the Ld. AR prayed to direct the Assessing Officer to allow deduction of Rs. 11,20,70,905/- under Section 42 of the Act. Moreover, Section 144C(10) of the Act, specifically mandates the Assessing Officer to follow the directions issued by the DRP. The Ld. AR relied upon the following decisions:
| (i) | Louis Dreyfus Company India (P.) Ltd. v. Dy. CIT ITR 595 (Delhi) |
| (ii) | Pr. CIT v. Fiberhome India (P.) Ltd. ITR 221/ITA 91/2024 (Delhi) |
| (iii) | Global One India (P.) Ltd. v. Dy. CIT ITD 355 (Delhi – Trib.) |
| (iv) | Olympus Medical Systems (P.) Ltd. v. ACIT ITD 676 (Delhi – Trib.) |
| (v) | Basware Corporation India v. Dy. CIT (Chandigarh – Trib.) |
| (vi) | Software Paradigms Infotech (P.) Ltd. v. Asstt. CIT (Bangalore – Trib.) |
| (vii) | July Systems & Technologies (P.) Ltd. v. Dy. CIT (Bangalore – Trib.) |
| (viii) | Xchanging Solutions Ltd. v. Dy. CIT (Bangalore – Trib.) |
Thus, the Ld. AR submitted that the Assessing Officer has violated the mandatory provisions of Section 144C of the Act and such order in violation of the Act is liable to be quashed.
37. The Ld. DR relied upon the assessment Order.
38. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the DRP has categorically directed the Assessing Officer that after deciding the eligibility of the assessee, the Assessing Officer has to determine the necessary amount of the deduction as per Section 42 of the Act. Therefore, it will be appropriate to direct the Assessing Officer to comply with the directions of the DRP after deciding the eligibility of the assessee. The issue is remanded to the file of the Assessing Officer for proper adjudication. Ground No. 6, 6.1 to 6.3 for A.Y. 2019-20 are partly allowed.
39. As regards to Ground No. 7 of Assessment Year 2019-20, interest under Section 234B of the Act, the same is consequential, hence not adjudicated upon at this juncture.
40. In the result, all the three appeals filed by the assessee are partly allowed.