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9. The aforesai d i nternati onal transacti ons pertai ni ng to i ntra-group servi ces recei ved by the appell ant (i .e. MSU charges, rei mbursement of expenses, payrol l expenses, Informati on Technol ogy and other charges) we re benchma rked by the appel l ant appl ying Transacti onal Net Margi n Method ('TNMM') as the transacti on of re cei pt of i ntra group se rvi ces were cl osely linked to the main business acti vi ty of the appel l ant of expl orati on and producti on of oil and gas. Si nce the operati ng margi n of the appell ant at 24.82% was hi gher than those of the compa rabl e compani es at 23.21% , i nternati onal transacti on of recei pt of intra-group se rvi ces was consi dered to be at a rm's l ength. It i s submi tted that the BG Exploration & Production India Ltd.

10. It i s submi tted that the appell ant incurs expendi ture to undertake acti vi ti es requi red by t he PSC, havi ng regard to i ts standard of ope rati on, i ncl udi ng the quali ty of executi on of work, acce ss to l atest i ndustry informati on and gl obal updates, safety of i ts empl oyees and the envi ronment, etc. The expenses on such se rvi ces are requi red to be i ncurred ba sed on commerci al expedi ency determined by BGEPIL.

11. It i s submi tted that there i s a real dearth of tal ent and avail abili ty of experts who can provi de servi ces whi ch have been recei ved by the appell ant from BGIL. In any case , si nce such resources may not be requi red al l the ti me, i t woul d be economi call y and commerci all y unvi abl e for the appell ant to empl oy hi ghl y techni call y sound personnel on pe rmanent basi s. Hence, need base d support was obtai ned by appell ant from BGIL whi ch has a wi de, experi enced and knowl edgeabl e pool of empl oyees at i ts di sposal .

BG Exploration & Production India Ltd.

Ground No. 10: Disallow ance of expenditure incurred on non-producing Production Sharing Cont racts ("PSCs") 10.1 The learned AO / DRP e rred in law and in facts in disallowing the expenditure of Rs.2,15,34,15,982 incurred on non-producing PSCs."

Facts:

27. The appel l ant cl ai med expl orati on expendi ture i ncurred on non-produci ng bl ock of Rs. 215,34,15,982 i n terms of secti on 42(1) of the Act read wi th Producti on Shari ng Contract of Panna / Mukta and Mi d and South Tapti gas fi el ds. In pursuance of the sai d business, the appell ant from ti me to ti me i dentifi es prospecti ve areas contai ning mi neral s and carri es out expl orati on /drilli ng and/or producti on acti vi ti es therei n. Accordi ngl y, the acti vi ty of expl orati on / dri lling at any new si te/area consti tutes part and parcel of the exi sti ng busi ness and conse quentl y expendi ture incurred i n rel ati on thereto has been i ncurred wholl y and excl usi vel y for the purposes of such busi ness. During the course of the assessment proceedi ngs, the AO proposed to di sall ow the aforesai d expense by all egi ng that:

expendi ture all owabl e onl y to the extent of 5% of the adjusted total i ncome of the appel l ant. The AO di d not, however, make any addi ti on si nce the sai d expenses had al ready been di sall owed by the TPO. The DRP di d not i nterfere wi th the acti on of the AO.

39. At the outset, Ld. C ounsel submitted that thi s i ssue has been deal t wi th by the Co-ordi nate Bench of thi s Tri bunal for assessment years 2010-11 and 20 12-13. He submitted that the assessee has i ncurred expenses to undertake acti vi ti es requi red by the PSC wi th regard to i ts standard of operati on, i ncl udi ng the quali ty of executi on of work, access to l atest i ndustry i nformati on and gl obal updates, safety of i ts empl oyees and envi ronment etc. and all these expenses are i ncurred on the basi s of commercial expedi ency determi ned by the taxpayer and the same need not be accepte d by the joi nt venture partner. Ld. AR for the taxpayer contended that i denti cal i ssue has al ready been deci ded i n favour of the taxpayer i n its own case for AY 2010-11 (supra).