Income Tax Appellate Tribunal - Mumbai
Reliance Industries Ltd, Mumbai vs Cit, Mumbai on 16 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "D", MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER
AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA No.3212/Mum/2015
Assessment Year: 2010-11
Reliance Industries Limited, Commissioner of Income Tax,
3rd Floor, Maker Chamber-IV, Large Taxpayer Unit, 29th Floor,
222, Nariman Point, Vs. Center No. 1, World Trade Centre,
MUMBAI Cuffe Parade,
MUMBAI
[PAN : AAACR 5055K]
(Appellant) (Respondent)
Appellant By : Shri Madhur Aggrwal
Respondent By : Shri Ajay Kumar, CIT-DR
Date of Hearing : 13-11-2018 Date of Pronouncement :- 16-11-2018
ORDER
Per Mahavir Singh, Judicial Member:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(LTU)-Mumbai, revising the assessment u/s. 263 of the Income Tax Act, 1961 [herein after referred to as 'Act'] for the AY. 2010-11, order dated 31-03-2015. The assessment was framed by the Addl.CIT(LTU), Mumbai, u/s. 143(3) read with section 144C(3) of the Act for the AY. 2010-11 vide order dt. 25-03-2013.
2 ITA No.3212/Mum/2015Reliance Industries Limited
2. At the outset, Ld. Counsel for the assessee stated that the assessee has raised nine grounds but now he stated that the assessee wants to withdraw Ground Nos. 1 to 6 and Ground Nos.
8 & 9. Ld. Counsel for the assessee stated that he has instructions from the assessee and a letter in this respect was filed dated 12-11-2018, wherein it was stated as under:
"The above appeal has been fixed for hearing on 13.11.2018 before your honour.
In this regard, we respectfully submit that we wish to withdraw ground number 1 to 6 and ground number 8 of the above appeal.
We regret for the inconvenience caused due to the aforesaid request".
2.1. In view of the above, Ld. Counsel stated that only effective ground remains is Ground No.7. When a query was put to Ld. Counsel that in case the assessee is not contesting Ground Nos.
6, 8 & 9, in that eventuality the revision order stands and he agreed for that. However, Ld. Counsel first of all drew our attention to the following Ground No.7 which he wants to contest on merits:
"7. While upholding the right of your appellant to claim deduction u/s. 42 of the Act in respect of costs pertaining to the aborted oil blocks which are surrendered during the year, the learned CIT seriously erred in concluding that the expense or loss of ₹ 101 Crores. Occasioned in respect of such aborted blocks which was allotted to the appellant under PSC wholly distinct from PSC in respect of KGD will go to reduce 3 ITA No.3212/Mum/2015 Reliance Industries Limited the profit derived by the appellant from qualifying undertaking (KGD) while computing profit from KGD eligible for deduction u/s. 80IB(9) of the Act, without appreciating that the KGD block licenses to your appellant under a distinct PSC constitutes an independent and standalone undertaking which qualifies for deduction u/s. 80IB(9) r.w.s. 80IA(5) of the Act and the eligible profit thereof cannot be allowed to be diluted as a result of presence of profit or loss in any other distinct activity or undertaking of the taxpayer".
2.2. Ld. Counsel accordingly drew our attention to para 1.16.3 of the revision order passed by the CIT u/s. 263 of the Act, wherein the claim of deduction u/s. 42(1)(a) of the Act was claimed by assessee on account of expenses incurred on blocks allotted for discovery and commercial production of oil to the assessee in KG Basin. These blocks which become infructuous or abortive exploration surrendered to Central Government and all the expenses incurred till date of surrender are claimed as deduction u/s.42(1)(a) of Act. Ld. Counsel drew our attention to the following computation by the CIT:
Assessment Year : 2010-2011 :
Net Profit/Loss as per Profit & 32291262269.21 Loss Add: Depreciation as per Profit 42123217929.00 and Loss Account Profit as P&L account 74414480198.21 Less: B/f Loss of Earlier Year Less: Claim U/s. 42(1)(a) 1010521671.00 abortive cost of other blocks 4 ITA No.3212/Mum/2015 Reliance Industries Limited 2.3. Ld.Counsel took us through the Tribunal's order in assessee's own case in IT(TP)A Nos. 1547/Mum/2016 (AY. 2010-
11); 2733/Mum/2017 (AY. 2011-12) and 5842/Mum/2017 (AY.
2012-13), dated 28-09-2018, wherein the Tribunal vide paras 9.3 to 108, allowed the claim of assessee on merits after considering in detail, which is as under:
"93. We have noticed earlier that the AO had held that the expenses relating to unsuccessful exploration in contract areas covered by other contracts also should be deducted from the aggregate value of Petroleum allocable to the Company from any field(s) in the Contract area. Accordingly the AO held that the deduction of expenses relating to unsuccessful exploration (also known as "Aborted blocks") claimed by the assessee u/s 42(1)(a) is not correct. The AO also held that the accumulation of expenses relating to successful exploration under the head "Intangible assets" is also not correct. Accordingly, the AO proceeded to recast the "Profit and Loss Account" of KG basin undertakings in accordance with the view taken by him, which is discussed by us in paragraph 88 (supra) for both the financial years relevant to AY 2010-11 and 2011-12. In this process,
(a) the AO disallowed the depreciation claimed by the assessee on "Intangible assets" discussed above.
(b) the AO also deducted the expenses relating to Aborted blocks or unsuccessful exploration (2042.69 crores).
(c) allowed depreciation at the applicable rates prescribed under Income tax Act on the Capital assets.
Since Article/clause 17.2.4 of PSC gave an alternative option to amortise expenses in 10 years, the AO asked the willingness of the assessee to opt for the alternative methodology. From the reply given by the assessee, the AO inferred that the assessee is opting for alternative method of deduction. Accordingly the AO deducted 1/10th of expenses requiring amortisation. Accordingly he re-computed the profit from KG basin activities for the financial year 2009-10 (AY 2010-11) and FY 2010-11 (AY 2011-12). The same resulted in loss of Rs.3367.38 crores 5 ITA No.3212/Mum/2015 Reliance Industries Limited in AY 2010-11. For AY 2011-12, the AO arrived at a profit of Rs.2672.16 crores.
94. The AO analysed the break-up of Sales revenue generated by the assessee from various products, which is given below:-
Natural Gas - 11,728.99 crores
Crude oil - 2,817.15 crores
Condensate - 193.30 crores
----------------------------
Total - 14,739.44 crores
===============
The AO noticed that the deduction u/s 80IB(9) is available only for production of "mineral oil". The AO took the view that the "Natural Gas"
cannot be included in the definition of "Mineral oil", as the word or term "natural gas" is not mentioned in sec.80IB(9)(ii) of the Act. The AO also took support of decision rendered by Hon'ble Supreme Court in the case of Navopan India Ltd vs. CCE 1994 (73) ELT 679 (SC) and other decisions of Hon'ble Supreme Court to buttress his views that the exemption provisions should be construed strictly. The AO also referred to the speech given by Hon'ble Finance Minister while moving the Finance Bill 2008 and also the Notes and clauses of Finance Bill, 2008, wherein a view was expressed that the term "mineral oil" does not include petroleum and natural gas for the purposes of sec. 80IB. However, the Government did not make any amendment in 2008 and left the question as to whether the term "mineral oil" would include "petroleum and natural gas" or not to the wisdom of courts.
95. The AO took the view that the underlying intent of the Government is that the term "Mineral Oil" should not include natural gas. Further the natural gas was included in the definition of mineral oil subsequently for those new participants who are prospecting mineral oil under VIII round of bidding for award of exploration contracts. The assessee had placed reliance on the decision rendered by Ahmedabad bench of Tribunal in the case of NIKO Resources Limited vs. DCIT (22 DTR 225), wherein it was held that mineral oil would include natural gas also. The AO, however, refused to follow the same by observing that the Income tax Department has not accepted the decision rendered by the Tribunal by filing appeal before the High Court by the revenue.
96. Accordingly, the AO took the view that the assessee is not entitled for deduction u/s 80IB(9) of the Act in respect of profit arising from sale of "natural gas". He took the view that the "Crude oil" alone falls under the definition of "mineral oil" used in sec.80IB(9) of the Act. Accordingly 6 ITA No.3212/Mum/2015 Reliance Industries Limited the AO held that the profit relating to sale of crude oil alone is entitled for deduction u/s 80IB(9) of the Act. Since the crude oil constituted 19.11% of the total turnover, the AO computed the profit arising on sale of crude oil (mineral oil) @ 19.11% of the total profit from the undertaking, i.e., 19.11% of Rs.2672.16 crores, which worked out to Rs.510.72 crores. Accordingly, he restricted the deduction u/s 80IB(9) of the Act to Rs.510.72 crores.
97. In the appellate proceedings, the Ld CIT(A) confirmed the disallowance of depreciation claimed on "Intangible assets". Hence the assessee is contesting the said decision of Ld CIT(A).
98. The ld A.R submitted that the assessee has followed the accounting practice of accumulating the costs incurred till the date of commercial production as "Intangible asset", since the "Participating right" acquired by the assessee from Government of India in the oil field is "Commercial right" eligible for depreciation. The Ld A.R submitted that the AO has allowed depreciation in AY 2010-11 and hence the AO should not have taken different view on this matter during the year under consideration. He submitted that the AO has however allowed 1/10th of revenue expenses as deduction and also allowed depreciation on the capital assets at the applicable rates. The Ld A.R contended that the assessing officer may be directed to allow depreciation as claimed by the assessee.
99. On the contrary, the Ld D.R submitted that the assessee has followed accounting practice contrary to the methodology prescribed under Production Sharing Contract. The Ld D.R submitted that the assessment order passed in AY 2010-11 has since been revised by Ld Pr. CIT u/s 263 of the Act. He submitted that the AO has rightly computed the deduction as provided in Production Sharing Contract. Accordingly he submitted that the order passed by Ld CIT(A) on this issue does not call for any interference.
100. We heard the parties on this issue and perused the record. We notice that the assessee is required to account for and claim expenses as provided in Production Sharing Contract, as per the provisions of sec. 42 of the Act. The PSC does not envisage accumulation of expenses and account as "Intangible Assets". In that case, there is no scope for allowing depreciation on the intangible assets, which is not permitted under PSC. Hence the Ld CIT(A) has taken the view that the assessee's accounting practice is not in accordance with the method prescribed in PSC and the AO was justified in disregarding the same and in disallowing the depreciation claimed on the Intangible assets. We have 7 ITA No.3212/Mum/2015 Reliance Industries Limited earlier examined the reasoning given by the assessing officer for disallowing the claim of depreciation. Before us, the assessee could not show how the method of accounting of accumulating expenses under the head "Intangible Assets" followed by the assessee is permitted under the provisions of the Act read with the PSC. The only contention of the assessee is that the AO has allowed depreciation in AY 2010-11 on intangible assets. However, the Ld D.R has submitted that the assessment order passed for AY 2010-11 has since been revised by Ld Pr. CIT us 263 of the Act. In any case, the principle of Res-judicata shall not apply to the income tax proceedings. Since the assessee is required to claim expenses in accordance with the clauses of PSC, in our view, the tax authorities are justified in rejecting the claim of "Intangible assets" and consequently rejecting the depreciation claimed thereon. Accordingly we uphold the order passed by Ld CIT(A) on this issue.
101. We would like to prefer to dispose of the Ground No.6 and 7 urged by the Revenue at this stage, as the facts relating to those grounds have been discussed in the preceding paragraphs. In Ground no.6, the revenue is challenging the decision of Ld CIT(A) in holding that the expenses relating to aborted blocks need not be reduced from the profit from sale of mineral oils for computing deduction u/s 80IB(9) of the Act, since the deduction is allowable for each "undertaking".
102. We have noticed earlier that the AO has taken the view that, after the commencement of commercial production, all the expenses relating to Aborted blocks (unsuccessful blocks) should be reduced from the profit arising from sale of mineral oil taken from successful block. Accordingly, the AO reduced a sum of Rs.2042.69 crores from the profit from sale of mineral oil obtained from successful block (here KG-DWN- 98/3) for the purpose of allowing deduction u/s 80IB(9) of the Act. For this purpose, the AO placed reliance on the clause/article 17.2.2 of PSC, which provided that -
"...to deduct all its unsuccessful Exploration Costs in contract areas covered by other contracts from the aggregate value of Petroleum allocable to the Company from any field(s) in the Contract area (i.e., KG-DWN-98/3 in this case)"
However the assessee contended that the deduction u/s 80IB(9) is allowed for each of the "undertaking" and it is so provided in sec. 80IA(5), which is made applicable to the deduction u/s 80IB(9) of the Act.
8 ITA No.3212/Mum/2015Reliance Industries Limited
103. The submissions made by the assessee before Ld CIT(A), as discussed by Ld CIT(A), are extracted below:-
"48. Assessee's submissions:
During the appellate proceedings, the assessee made submissions. They are summarized as under:
In this regard the relevant provisions of the Act are reproduced as under:
Section 80IA[5) reads under:
"(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made."
Section 801B(9) reads as under:
"(9) The amount of deduction to an undertakingshall be hundred per cent of the profits for a period of seven consecutive assessment years, including the initial assessment year, if such undertakingfulfils any of the following, namely:--
(i) .............
(ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997:
[Provided that the provisions of this clause shall not apply to blocks licensed under a contract awarded after the 31st day of March, 2011 under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. 0- 19018/22/95-ONG.DO.VL, dated the 10th February, 1999 or in pursuance of any law for the time being in force or by the Central or a State Government in any other manner;]
(iii)......];"9 ITA No.3212/Mum/2015
Reliance Industries Limited The assessee submitted that on perusal of section 80-IB(9J, it can be observed that this sub-section provides for granting deduction on the profits and gains derived from "such - undertaking",it is clear pointer for granting deduction in respect of profit earned by each of such eligible undertakings separately.
According to the assessee in light of the provisions of section 80- IB(9) r.w.s 80-IA(5) of the Act, there is no warrant for reducing the loss of one eligible undertaking from the profit of the other eligible undertaking. Such an interpretation would violate the unambiguous language of section, which otherwise talks of granting deduction in respect of the 'profits and gains derived from such undertaking'. If we were to read the section in a way that has been read by the AO, then instead of the phrase extracted in the preceding line, it should have been 'aggregate of profits and gains derived from such undertakings'.
The assessee has placed reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Canara Workshop (P.) Ltd.[1986] 161 ITR 320. The Supreme Court in this case held that in computing the profits for the purpose of deduction under section 80E, the loss incurred by the in the manufacture of alloy steels (a priority industry) could not be set off against the profits of the manufacture of automobile ancillaries (another priority industry) and hence the was entitled to deduction at the specified rate on the entire profits of the automobile parts industry included in the total income without deducting therefrom the loss in the alloy steel manufacture. Thus it was submitted by the assessee that by substituting the word 'undertaking' for the word 'priority industry' in the aforesaid Supreme Court judgment, it can be said that losses from abortive blocks/ wells, cannot be set off against the profit derived from KGD Block which is also an independent undertaking. Further, reliance was also placed on the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Visakha Industries Ltd. [2001] 251 ITR 471 where a similar view was taken by the High Court by holding that the deductions contemplated under section 80HH and 80-1 are to be allowed with reference to the profits of the particular industrial undertaking and not with reference to the total income of the and therefore loss in another unit cannot be set off against the profits of eligible unit.
Further, it was submitted that while computing deduction u/s.80IB(9) of the IT Act, the provisions of section 80IA(5) are 10 ITA No.3212/Mum/2015 Reliance Industries Limited applicable, which provide that for the purposes of determining the quantum of deduction, the profits and gains of the eligible business shall be computed as if such eligible business were the only source of income of the assessee. The term eligible business here would means, profits and gains from contract area KGD. Therefore, the losses in respect of unsuccessful exploration of other blocks are not be reduced while working out profits and gains of the eligible undertaking i.e. contract area KGD.
The assessee has claimed deduction in respect of abortive blocks u/s 42(l)(a) of the Act The plain reading of section 42(1) implies following conditions to be satisfied for the purpose of allowing deduction/allowance in addition to the allowance admissible in other sections of the Act a. There should be an agreement of the person with Central Government (and agreement should be laid on the table of each house of the Parliament) b. Only such allowance are allowed which are specified in the PSC c. Such specified allowance should be in relation to various specific natures as mentioned in sub-clause (a) (b) and (c).
d. Such allowances shall be computed and made in the manner specified in the PSC.
The AO while computing deduction u/s.80lB(9) of the Act in respect of KGD undertaking has reduced the amount of Rs.2042.69 crores being the abortive cost of wells incurred in contract areas other than KGD undertaking. In doing so he has relied upon the provisions of Article 17 of the PSC signed by the assessee with the Central Government which deals with the computation of profits and gains for the purpose of Income-tax and is named as "Taxes, Royalties, Rental Duties etc". The relevant extract is reproduced below.
Article 17.2.2 states that" a Companyshall be entitled, for income tax purpose only, to deduct all its unsuccessful Exploration Costs 11 ITA No.3212/Mum/2015 Reliance Industries Limited in contract areas covered by other contracts from the aggregate value of Petroleum allocable to the Company from any Field(s) in the Contract Area in the manner as follows:
a. unsuccessful Exploration Costs incurred in contract areas other than the Contract Area where a Commercial Discovery has been made up to the date of commencement of Commercial Production shall be aggregated and the Company shall be entitled to deduct such costs at the rate of one hundred per cent (100%) per annum;
b. unsuccessful Exploration Costs incurred in contract areas other than the Contract Area where a Commercial Discovery has been made, after the commencement of Commercial Production, shall be deductible at the rate of one hundred per cent (100%) per annum of such costs beginning from the Year such costs are incurred."
Thus, on harmonious reading of the aforesaid provision, it can be concluded as follows:
The deduction under Article 17.2.2 in respect of abortive/unsuccessful blocks is to be allowed to a Companywhile computing its profits and gains from the businessof Petroleum Operations. Thus, the same are not be reduced for the purpose of computing the profits of an 'Undertaking' eligible for deduction u/s80IB of the Act.
As stated above, as per provisions of section 80IB(13) of the Act, the provisions of section 80IA(5) of the Act are applicable while computing the deduction under section 80IB(9). Section 80IA(5) of the Act provides that for the purposes of determining the quantum of deduction, the profits and gains of the eligible business shall be computed as if such eligible business were the only source of income of the assessee. Thus while computing the profits of an 'Undertaking', the same shall be computed as if, such Undertaking were the only source of income of the assessee and hence losses of other Undertaking should not be adjusted/considered while working out the income from such Undertaking. Thus, in light of the provisions of section 80-IB(9) r.w.s 80-1A(5) of the Act, it was submitted by the assessee that deduction u/s 42(l)(a) in respect of abortive/unsuccessful blocks 12 ITA No.3212/Mum/2015 Reliance Industries Limited are not be reduced while computing the profits of the undertaking viz: KGD which is eligible for deduction u/s 801B(9)."
104 After analysing the facts of the case and after considering the contentions of the assessee, the Ld CIT(A) decided this issue in favour of the assessee by holding that the expenses relating to aborted blocks need not be reduced from the profits for the purpose of computing deduction u/s 80IB(9) of the Act. The revenue is aggrieved by this decision rendered by Ld CIT(A).
105. The Ld D.R submitted that the "Production Sharing Contract"
shall override the provisions of Income tax Act in terms of sec.42 of the Act. This is so held by Hon'ble Supreme Court in the case of Enron Oil & Gas India Ltd (2008)(305 ITR 75). He submitted that the Article/clause 17.2.2 of the PSC provided for deduction of expenses relating to Abortive blocks against the profit from sale of mineral oil. Accordingly he submitted that the AO has rightly deducted Rs.2042.69 crores relating to Abortive blocks from the profit in order compute the deduction u/s 80IB(9) of the Act.
106. The Ld A.R, on the contrary, submitted that the clause/article 17.2.2 of PSC provides the manner of computation of profit at entity level and hence the expenses relating to aborted blocks are required to be reduced from the profit from sale of mineral oil while computing profit at entity level. However clause/article 17.2.5 of PSC has also stated that "all other provisions of Income tax Act will apply". He submitted that, by virtue of sec.80IB(13) of the Act, the provisions of sec. 80IA(5) has been made applicable to the deduction allowed u/s 80IB(9) of the Act. As per the provisions of sec. 80IA(5), the deduction is to be computed as if such eligible business were the only source of income of the assessee. He submitted that the assessee has obtained 31 different contracts from Government of India through auction process and each contract should be treated as separate undertaking for the purpose of sec. 80IB(9) of the Act. He submitted that the provisions of sec.42 and PSC governs the deduction allowable in respect of expenses incurred on aborted blocks and sec.80IA(5) read with article/clause 17.2.5 of PSC overrides the provisions of sec.42 and PSC. He further submitted that the Explanation given below sec.80IB(9) is concerned with "all the blocks" licensed under a "single contract". He submitted that the expenses relating to abortive blocks sought to be reduced by the AO were related to different Contracts and hence the above said Explanation given below sec.80IB(9) will not apply to the instant case.
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107. We have heard rival contentions on this issue. We have noticed earlier that the Ld CIT(A) has decided this issue in favour of the assessee by holding that each contract is a separate undertaking and hence the expenses relating to aborted blocks of different contracts cannot be reduced from the profit from sale of mineral oil obtained from another contract. The operative portion of Ld CIT(A) on this issue are extracted below:-
"49. Decision:
I have considered the facts of the case and the submissions made by the assessee. The issue for consideration is whether cost of abortive/unsuccessful blocks (other independent undertakings) are be reduced while computing the profits of a successful block (KGD in the assessee's case which is independent undertaking) for the purpose of claiming deduction u/s 80-IB(9).
The assessee was engaged in the business of exploration and production of mineral oil. The assessee was awarded 31 contract areas under separate production sharing contracts (PSC) signed with the Government of India. The above contract areas were awarded on bidding in separate auction for each contract area. There is no dispute that for the purpose of claiming deduction u/s.80IB [9) of the Act each contract area constituted an independent undertaking. Since the assessee had complied with the conditions specified u/s 80IB(9) of the Act, it claimed deduction of the profits and gains of KGD undertaking u/s 80-IB(9) of the Act. While computing the profits and gains of KGD undertaking for the purpose of claiming deduction under the section 80IB(9) of the Act, the provisions of section 80IA(5) are applicable, which provide that for the purposes of determining the quantum of deduction, the profits and gains of the eligible business shall be computed as if such eligible business were the only source of income of the assessee.
Accordingly, the assessee has correctly not reduced the unsuccessful exploration cost incurred in contract area other than KGD, which has been made in the computation of income u/s 42(l)(a) against the entire income of the assessee company while computing the business income.
The AO has however, rejected the above claim of the assessee and has reduced the amount of Rs.2042.69 crores being the 14 ITA No.3212/Mum/2015 Reliance Industries Limited abortive cost of wells incurred in contract areas other than KGD while computing deduction u/s.80IB(9) of the Act in respect of KGD undertaking. In doing so, he has relied on the provisions of Article 17.2.2. of the Production Sharing Contract (PSC). However, on harmonious reading of the provisions of Article 17 of the PSC, it can be concluded that the deduction under Article 17.2.2 in respect of abortive/unsuccessful blocks is to be allowed to a Company while computing its profits and gains from the business of Petroleum Operations. Thus, the same are not be reduced for the purpose of computing the profits of an 'Undertaking' eligible for deduction u/s 80IB.
Thus, this ground of appeal is allowed and AO is directed to compute the profits of KGD undertaking on a standalone basis as per the provisions of 80IA(5), for the purpose of claiming deduction under the section 801B(9) of the Act. The AO is accordingly, directed that cost in respect of abortive/unsuccessful blocks are not be reduced while computing the profits of the undertaking viz:
KGD which is eligible for deduction u/s 80IB(9). This ground of appeal is accordingly allowed."
108. We notice that the article/clause 17.2.2 of PSC allows deduction of expenses relating to aborted blocks against the profit arising from other blocks. In our view, the assessee was right in contending that the article/clause 17.2.2 was concerned with the computation of income at entity level in terms of sec.42 of the Act. The article/clause 17.2.5 of PSC states that all other provisions of Income tax Act shall apply. The PSC does not deal with the deduction given u/s 80IB(9) of the Act and hence the provisions of the Act shall apply. Hence the deduction u/s 80IB(9) of the Act has to be computed in terms of sec.80IB of the Act. Sec. 80IB(13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisions of sec.80IA(5) of the Act, the profits and gains of eligible business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee. In view of these provisions, the deduction u/s 80IB(9) has to be computed after ascertaining profits and gains of eligible business in terms of sec 80IA(5) of the Act. Hence there is no scope to adjust expenses relating to other "undertakings" while computing deduction u/s 80IB(9) of the Act. Hence, we are of the view that the decision rendered by Ld CIT(A) does not call for any interference and accordingly we uphold the same".
15 ITA No.3212/Mum/2015Reliance Industries Limited 2.4. When this was confronted to Ld. CIT-Departmental Representative, he fairly agreed that on merits, the issue is covered in assessee's own case cited supra. As the Revenue could not point out anything, we are of the view that the issue on merits is exactly covered on facts. Hence, taking the consistent view and respectfully following the Tribunal's order cited supra, we allow the ground No. 7 raised by assessee.
3. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 16th day of November, 2018 Sd/- Sd/-
(RAJESH KUMAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 16th November, 2018 TNMM 16 ITA No.3212/Mum/2015 Reliance Industries Limited Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A),Mumbai 4. The CIT 5. DR, 'D' Bench, ITAT, Mumbai BY ORDER, #True Copy # Assistant Registrar Income Tax Appellate Tribunal, Mumbai