Oil & Natural Gas Corporation Limited v. Commissioner Of Income Tax &Anr

A OIL & NATURAL GAS CORPORATION LIMITED COMMISSIONER OF INCOME TAX &ANR. (Civil Appeal No. 730 of 2007) JULY01, 2015 [RANJAN GOGOi AND PINAKI CHANDRA GHOSE, JJ.] Companies (Profits) Surtax Act, 1964-s. 24AA(2)(a) c [and (2)(b) ][-][ Exemption Notification ][No. ] [307(E) dated ]-31.3.1983 issued uls. 24AA Whether the appellant-assessee covered within the purview of the Notification- Held: s. 24AA grants power to Central Government either to grant exemption to both categories of foreign companies D enumerated in sub-section (2)(a) or (2)(b) or to any one of -specified category Exemption Notification has granted exemption only to the category of foreign companies enumerated in sub-section (2)(a) and has specifically omitted the category enumerated ins. (2)(b)- Thus, when the Central E Government has consciously chosen to grant exemption to one category, the scope of the grant cannot be enhanced or -expanded The appellants-assesses not entitled to the exemption under the Notification, as they fall in the category enumerated in sub-section (2)(b) of s. 24AA. Dismissing the appeals, the Court HELD: 1. The power to grant exemption u/s. 24-AA of the Companies (Profits) Surtax Act, 1964, is two-G [fold ][and ][covers ][agreements ][directly ][associated ][with ][the ]prospecting or extraction or production of mineral oils or contracts facilitating or making available services in connection with such a business. There is nothing in the provisions of the Act which could have debarred the H Central Government from granting exemptions to both 992 categories of foreign companies mentioned above or to A confine the grant of exemption to any one or a specified category offoreign companies. [Para 12] [1004-H; 1005• A-B] 2. On reading the Notification No.GSR 307(E) s dated 31.3.1983, it clearly appears that the exemption has been granted only to foreign companies with whom the · Central Government had executed agreements for direct association or participation by the Central Government or the persons authorized by the appellant in the · C prospecting or extraction or production of mineral oils. Thus, the exemption notification confines.or restricts the scope of the exemption to only one category of foreign companies which has been specifically enumerated in sub-section 2(a) of Section 24-AA of the Surtax Act. The D second category of foreign companies that may be providing services as enumerated in sub-section 2(b) of Section 24-AA is specifically omitted in the exemption notification. The power under Section 24-AA of the Surtax Act, is wide enough to include even this category of E foreign companies. The omission of this particular category of foreign companies in the exemption notification, notwithstanding the wide amplitude and availability of the power under Section 24-AA, clearly F reflects a conscious decision on the part of the Central Government to confine the scope of the exemption notification to only those foreign companies that are enumerated in and covered by sub-section 2(a) of Section 24-AAofthe Surtax Act. [Para 12] [1005-C-G] G 3. The explanatory notes on the provisions of Finance Act, 1981 [Paragraph 11(4) and 26(1)] clearly goes to show that the legislative intent behind inclusion of Section 24-AA is to encourage foreign companies to H enter into participating contracts with the Union Translaltor – Palak Prajapati 4785 , 4787 , 4790 , 6009 , 6010 , 6014 , 6015 , 6017 , 6018 , 6019 ,6022 2007 A Government in the business of oil exploration or production. The further legislative intent was to seek greater participation of foreign companies in the matter of providing services including supply of ships, aircrafts, machinery or plant in connection with business of B extraction or p.roduction of mineral oils. The aforesaid l~gislative intent which is two-fold is manifested by the two limbs of sub-section 2 of Section 24AA of the Surtax Act to which the power of exemption was intended to operate i.e. sub-section 2(a) and 2(b) of Section 24AA. If C out of the two limbs where the power of exemption was intended to operate, the repository of the power i.e. Central Government, had consciously chosen to grant exemption in one particular field i.e. foreign companies covered by sub-section 2(a) of Section 24-AA, the scope 0 of the grant cannot be enhanced or expanded. by a judicial pronouncement. [Para 13] [1005-H; 1006-A-E] Commissioner of Income Tax-Ill Vs. Calcutta Knitwears, Ludhiana (2014) 6 SCC 444; E Commissioner of Central Excise, New Delhi Vs. Hari Chand Shri Gopal and Ors. (2011) 1 SCC 236: 2010 (13) SCR 820 - relied on. Case Law Reference F (2014) 6 sec 444 relied on. Para 11 relied on. Para 11 2010 (13) SCR 820 CIVILAPPELLATE JURISDICTION : Civil Appeal No. 730 of2007 From the Judgment and Order dated 15.12.2005 in ITA No. 443/2001 of The High CourtofUttaranchal at Nainital. WITH Civil Appeal Nos. 728, 732, 734, 735, 739,742, 4140, H 4785,4787,4790,6009,6010,6014,6015,6017,6018,6019, 6022 of2007 OIL & NATURAL GAS CORPORATION LIMITED v. COMMISSIONER OF INCOME TAX Civil Appeal Nos. 2009,-4315, 4316, 4318, 4319, 4320, A 4322 OF 2008 Arvind P. Datar, Sangeeta Bharti, Krishanu Adhikary, Subramonium Prasad and S.R. Setia for the Appellant. Guru Krishna Kumar, Avijit Prasad, Sneha Iyer, Gargi Khanna, Anil Katiyar and B.V. Balaram Das for the Respondents. The Judgment of the Couit was delivered by RANJAN GOGOi, J. 1. A short and precise question which is common to all the appeals under consideration has arisen in the present group of appeals instituted by the Oil and Natural Gas Corporation (ONGC) which has been assessed as a representative assessee within the meaning of Section D 160-A of Income Tax Act, 196.1. The assessments in question have been made under the provisions of the Companies· (Profits) SurtaxAct, 1964 (hereinafter referred to as the 'Surtax Act'). 2. The question posing for an answer revolves around the true and correct purport and effect of exemption notification bearing No.GSR 307(E) dated 31.03.1983 issued under Section 24AAofthe Surtax Act. Fora quick understanding of the question that arise for consideration, the provisions of F Section 24-AA of the Surtax Act and the contents of the notification bearing No.GSR 307(E) may be extracted below: "24AA. Power to make exemption, etc., in relation to participation in the business of prospecting for, extraction; etc., of mineral oils. (1) If the Central Government is satisfied that it is necessary or expedient so to do in the public interest, it may, by notification in the official Gazette, make in exemption, reduction in rate or other modification in respect of surtax in favour of any class of foreign companies specified in sub-section (2) or in regard to the whole or any part of the profits chargeable of such class of companies. B Explanation.-For the purpo~es, of this sub-section, "foreign company" shall have the meaning assigned to it in clause (4) of section BOB of the Income-tax Act. 4322 2008 (2) The foreign companies referred to in sub-section (1) are the following, namely:-( a) foreign companies with whom the Central Government has entered into agreements for the association or participation of that Government or any person authorized by that Government in any business consisting of the prospecting for or extraction or production of. mineral oils; and (b) foreign companies providing any services or facilities or supplying any ship, aircraft, machinery or plant (whether by way of sale or hire) in connection with any business consisting of the prospecting for or extraction or production of mineral oils carried on by that Government or any person specified by that Government in this behalf by notification in the official Gazette. (3) Every notification issued under this section shall be laid before each House of Parliament. Explanation.-Forthe purposes of this section, "mineral oil" includes petroleum and natural gas." "GSR No. 307(E) - Exemption from surtax of COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.] foreign· companies with whom Central Government has ente ... Exemption from surtax of foreign companies with whom Central Government has entered into agreements for participation in business of prospecting for or extraction of mineral oils -Notification issued under sub-section (1) Whereas the Central Government is satisfied that it is necessary and expedient in the public interest to make an exemption in respect of surtax in favour of foreign companies with whom the Central Government has entered into agreements for the association or participation of that Government or any person authorised by that Government in any business consisting of the prospecting for or extraction or production of mineral oils; Now, therefore, in exercise of the powers conferred by section 24AA of the Companies (Profits) Surtax Act, 1964 (7 of 1964), the Central Government hereby provides that no surtax shall be payable by such foreign companies. Explanation : For the purposes of this notification : (a) "foreign company" shall have the meaning assigned to it in clause (4) of section 808 of the Income-tax Act, 1961 (43of1961); (b) "mineral oil" includes petroleum and natural gas. Notification: GSR No. 307(E), dated 31-3-1983." 3. Section 24-AA of the Surtax Act, as it would appear, vests in the Central Government the power to make exemption, A reduction in rate or other modification in respect of Surtax in favour of any class of foreign companies which are specified in sub-section (2), in regard to the whole or any part of the chargeable profits liable to tax under the Surtax Act. Sub-section (2) of Section 24-AA refers to two categories of foreign B companies. The first is foreign companies with whom the Central Government has entered into agreements for association or participation, including participation by any authorized person, in any business consisting of the prospecting or extraction or production of mineral oils. The C second category of foreign companies mentioned in sub-section (2) is foreign companies that may be providing services or facilities or supplying any ship, aircraft, machinery or plant in connection with any business of prospecting or extraction or production of mineral oils carried on by the Central 0 Government or any authorised person. Specifically the Section states that mineral oils will include petroleum and natural gas. 4. The exemption notification bearing No.GSR 307(E) dated 31.3.1983, as it has been noticed, specifically grants E exemption in respect of surtax in favour of foreign companies with whom the Central Government has entered into agreements for association or participation of that Government or any authorized person in the business of prospecting or F extraction or production of mineral oils. 5. In the present appeals, the ONGC had executed agreements with different foreign companies for services or facilities or for supply of ship, aircraft, machinery and plant, as may be, all of which were to be used in connection with the G prospecting or extraction or production of mineral oils. Such agreements do not contemplate a direct association or participation of the ONGC (a person authorized by the Central Government by notification dated 2.8.1989) in the prospecting H or extraction or production of mineral oils but involved the taking OIL & NATURAL GAS CORPORATION LIMITED v. COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.] of services and facilities or use of plant or machinery which is A connected with the business of prospecting or extraction or production of mineral oils. 6. In the above situation, the primary authority took the view that the agreements executed by the ONGC with the B foreign companies being for services to be rendered and such agreements not being for association or participation in the prospecting or extraction or production of mineral oils, would not be covered by the exemption notification in question which by its very language granted exemption only to foreign C companies with whom there were agreements for participation by the Central Government or the person authorized in the business of prospecting, extraction or production of mineral oils. The agreements in question, according to assessing authority, were, therefore "Service Agreements" and hence D covered by sub-section 2(b) of Section 24-AA of the Surtax Act and were accordingly beyond the purview of the exemption notification. 7. The said view was reversed by the learned Appellate E Commissioner and upheld by the Learned Income Tax Appellate Tribunal. In the appeal under Section 260A of the Act, the High Court of Uttarakhand in the lead case (CA No. 730 of 2007) overturned the view taken by the Appellate Commissioner and the learned Tribunal leading to the F institution of the present appeal by the aggrieved representative assessee i.e. the ONGC. 8. We have heard Shri Arvind P. Datar, learned senior counsel appearing for the appellant and Shri Guru Krishna G Kumar, learned seni<!lr counsel for the Revenue. 9. The respective arguments though have been elaborate the point urged is brief. Shri Datar would contend that as the exemption notification contains/uses.the same language as H