The Delhi bench of Income Tax Appellate Tribunal (ITAT) recently provided partial relief to Cairn Energy Hydrocarbon Ltd.
Ajay Vohra, Ravi Sharma, Subhangi Arora, advocates appeared for the assessee,and Gangadhar Panda, commissioner of Income Tax appeared for the revenue.
Assessee Cairn Energy Hydrocarbons Limited (CEHL) is a company incorporated in Scotland, U.K. and is a wholly owned subsidiary of Cairn India Holdings Limited, a company registered in Jersey Channel Island. The assessee is primarily engaged in the business of prospecting, drilling, exploring, producing and generally dealing in minerals, oils, gas and other related by-products.
The assessee acquired 50% Participating Interest in the contract area located in Rajasthan with the approval of Government of India.
The remaining PI was held byCairn Energy India Pty Ltd. (‘CEIL’). It is to be noted that Oil and Natural Gas Corporation Ltd.ONGC was also a partner in the Rajasthan Block. CEIL being the operator under the Production Sharing Contract (PSC). ONGC, as per clauses of PSC, exercised its option to acquire 30% interest in the Rajasthan Block.
Assesse filed an appeal before ITAT on the ground that the “CIT(A)not allowed expenses incurred in the preceding years without appreciating that these expenses were disallowed by the assessing officer in the respective assessments on the ground that these expenses were to be allowed in the year of actual commencement of commercial production and the same ought to have been allowed in the captioned year wherein the commercial production has commenced.”
When the counter appeal filed by the revenue, they raised that “CIT(A) has erred in holding the interest of income Rs. 5,16,06,907/- as business income in place of income from other sources.”
Ajay Vohra, Ravi Sharma, Subhangi Arora, advocates appeared for the assessee,and Gangadhar Panda, commissioner of Income Tax appeared for the revenue.
The division bench of ITAT comprising B. R. R. Kumar, (Accountant) and. Saktijit Dey, (Judicial Member) observed that “
Interest earned out of temporary investments made out of borrowed funds not immediately required for utilization in business is treated as business income as the commercial production has started from 29.08.2009. Ergo, the assessee gets relief of an amount of Rs. 5,16,06,907
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