The Commissioner Of Income Tax-5 v. M/S.essar Oil Ltd

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION The Commissioner of Income Tax-5....Appellant vs. M/s.Essar Oil Ltd....Respondent.--- Mr.Suresh Kumar, for Appellant. Mr.Soli Dastoor, Sr.Advocate with Mr.N.Shah &Mr.A.K.Jasani, for Respondent. P.C.:-1.The Commissioner of Income Tax has raisedthree questions in this appeal, which read as under:- Section 9(1)(i) r/w. Sec.4 & 5 of the IncomeTax Act,1961 and other provisions and whether on the facts and circumstances ofthe case and in law the Hon'ble Tribunal isright in allowing the appeal of the assesseeand allowing the deduction of expenditure ofRs.14,31,730/-beingtheexpenditureincurred for exploration and production ofoil and gases. (2)Whether the true scope and correctinterpretation of Sec.80 HHB of the IncomeTax Act,1961 and other provisions andwhether on the facts and circumstances ofthe case and in law the Hon'ble Tribunal isright in allowing the appeal of the assesseeas to the deduction of Rs.6,27,12,192/-being the actual money brought into India inconvertible Foreign Exchange. (3)Whether the true scope and correctinterpretation of Sec.9(1)(i) read withSec.4 and 5 of the Income Tax Act,1961 andother provisions and whether on the factsand circumstances of the case and in law the Hon'ble Tribunal is right in allowing theexclusion of profit of Rs.14,79,10,603/-being the profit earned in Oman. 2.As regards the first question is concerned,the Counsel on both the sides agree that similarquestion raised by the Revenue in Income Tax appeal(Lodg.)no.921 of 2006 (C.I.T. vs. M/s.Essar Oil Ltd.)has been dismissed by us today i.e. on 16.10.2008. 3.So far as the second question is concerned,it is not in dispute that the assessee had executedcertain contracts in the Countries viz. Oman andQatar. The foreign currency earned from the saidproject was partially used for repaying the loantaken in foreign currency in the foreign country forexecuting the said project. The Tribunal relying onthe decision of the Apex Court in the case “J.B.Bodaand Co.Pvt.Ltd. Vs. Central Board of Direct Taxes,reported at 223 ITR 271” held that the assessee isentitled to claim deduction under section 80HHB ofthe Income tax Act in respect of the entire foreigncurrency earned from the aforesaid projects. Although the decision of the Apex Court in the case“J.B.Boda and Co.Pvt.Ltd. Vs. Central Board of DirectTaxes, reported at 223 ITR 271” related to thededuction under section 80-O of the Income Tax Act,in our opinion, the ratio laid down therein wouldapply to the facts of the present case relating togrant of reduction under section 80 HHB of the IncomeTax Act, because, the loan amount was paid in foreigncurrency is not disputed and even if the entireforeign currency was brought into India, the assesseewould have been required to remit the foreigncurrency to discharge the loan taken in foreigncurrency for executing the project. Therefore, thesecond question raised by the revenue does notsurvive. 4.As regards the third question is concerned,it is not in dispute that the assessee has apermanent establishment at Oman and the assessee hasbeen taxed in respect of the income earned from thesaid establishment under the provisions of the IncomeTax law at Oman. Therefore, in the light of Article 7of Double Taxation Avoidance Agreement (DTAA) entered into by and between India and Oman and in the lightof the judgment of the Apex Court in the case “CITvs. P.V.A.L.Kulandagan Chettiar, 267 ITR 654”, thedecision of the Tribunal in excluding the profitearned from the permanent establishment at Omancannot be faulted. 5.In this view of the matter, we see no meritin the appeal and accordingly, the same is dismissed. (D.K.DESHMUKH, J.) (J.P.DEVADHAR, J.)