HINDUSTAN OIL EXPLORATION CO. LTD., MUMBAI V. ACIT - 12 (2)(2), MUMBAI

ITA 2545/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9618 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 24-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH LD
• Assessee Lawyers: NISHIT GANDHI LD
• Keywords: General deduction

Judgement Text

ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO . 2545/MUM/2019 ( / ASSESSMENT YEAR: 20 07 - 08 ) HINDUSTAN OIL EXPLORATION CO. LTD. KH E TWARI DARBAR ROAD OFF - LINKING ROAD, KHAR (W) MUMBAI - 400 052 / VS. A CIT - 12(2)(2) AAYKAR BHAVAN, 145A, 1 ST FLOOR M.K. ROAD MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACH - 1407 - P ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI NISHIT GANDHI - LD. AR REVENUE BY : SHRI GURBINDER SINGH - LD. DR / DATE OF HEARING : 15/07/2021 / DATE OF PRONOUNCEMENT : 26/07/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE ASSESSEE IS IN SECOND R OUND OF APPEAL BEFORE US SINCE THE MATTER WAS EARLIER REMAN D ED BACK BY CO - OR DINATE BENCH OF TRIBUNAL (ITA NO. 61/MUM/2011 ORDER DATED 07/02/2014) TO THE FILE OF LD. ASSESSING OFFICER (AO) WI T H FOLLOWING OBSERVATIONS: - 25. THE AO HAS DISALLOWED THE ENTIRE EXPENDITURE OF RS. 7,57,8 0,10 4/ - . AS SUCH, EXPENSE WAS FIRST CLAIMED IN ASSES SMENT YEAR 1998 - 99, WHICH WAS ALLOWED BY THE ID. CIT(A) AND THE APPEAL BEFORE THE ITAT, AS FILED BY THE DEPARTMENT, WHICH IS STILL PENDING WHERE THE ISSUE PERTAINED TO 'DRILLING' FOR PROSPECTING. 26. THE AR SUBMITTED BEFORE US THAT AS PER THE PRODUCTION SH ARING CONTRACT BETWEEN GOVERNMENT OF INDIA A ND ONGC & GSPCL & HOECL PROSPECTING ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 2 BUSINESS , WHICH INCLUDES EXPLORATION EXPENSES AND DRILLING EXPENSES. THE AR SUBMITTED THAT SINCE THE WORD DRILLING DID NOT FIGURE IN SECTION 42, THE AO HAS RESTORED TO THE DISA LLOWANCE AND ALSO THAT FULL CONTENTS OF THE AGREEMENT DATED 12.04.2000 MAY NOT HAVE BEEN REFERRED TO, THEREFORE, THE AO MAY LOOK INTO THE CONTENTS OF THE CLAUSES OF THE AGREEMENT SIGNED BY THE ASSESSEE COMPANY WITH THE GOVERNMENT OF INDIA AND TWO OTHER PAR TIES. 25. THE DR SUBMITTED THAT ONLY BREAK U P AS APPENDED AT APB 128 & 129 WAS GIVEN WIT HOUT ANY FURTHER DETAILS. HE, THEREFORE, AGREED WITH THE AR THAT THE ISSUE BE RESTORED TO THE AO. 26. WE HAVE HEARD THE ARGUMENTS AND REFERRED TO THE DETAIL AND THE AGR EEMENT AND ITS RELEVANT CLAUSES, I.E. CLAUSE 16.2.1, WHICH READ AS : 16.2. PURSUANT TO THE PROVISIONS OF SECTION 42 OF THE INCOME TAX ACT, 1961. THE ALLOWANCES SPECIFIED HEREIN SHALL APPLY IN COMPUTING INCOME TAX PAYABLE BY A COMPANY ON ITS PROFITS AND GAI NS FROM THE BUSINESS OF PETROLEUM OPERATIONS IN LIEU OF (AND NOT IN ADDITION TO) CORRES PONDING ALLOWANCES PROVIDED FOR UNDER THE HEADING 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' IN THE INCOME TAX ACT, 1961. 16.2.1 SUBJECT TO THE PROVISIONS HEREIN BELO W, DEDUCTIONS AT THE RATE OF ONE HUNDRED PER CENT (100%) PER ANNUM SHALL BE ALLOWED FOR ALL EXPENDITURES INCURRED IN RESPECT OF EXPLORATION OPERATIONS AND DRILLING OPERATIONS. THE EXPENDITURE INCURRED IN RESPECT OF DEVELOPMENT OPERATIONS, OTHER THAN DRILLIN G OPERATIONS, AND PRODUCTION OPERATIONS WILL BE ALLOWABLE AS PER THE PROVISIONS OF THE FOLLOWING . 27. THOUGH THE AR HAS AGREED TO HAVE THE EXPENSES AND DETAILS ALONG WITH RELEVANT CLAUSES OF THE AGREEMENT, VERIFIED BY THE AO, BUT WE MUST OBSERVE AS AN OBI TER THAT IN PROSPECTING ACTIVITY, WHERE OIL, NATURAL GAS, AND/OR OTHER MINERALS OR META L ARE TO BE EXTRACTED, HOW CAN DRILLING ACTIVITY, HAS TO BE KEPT ASIDE. THE MINERALS ARE THE DOWN THE EARTH'S CRUST, UNLESS HEAVY DUTY DRILLING MACHINES ARE NOT USED AS THE PRIMARY AND BASIC EQUIPMENT FOR GOING DE EP DOWN IN THE EARTH, PROSPECTING AND ANY O THER EXPLORATION CANNOT BE DONE. THIS, ACCORDING TO US, IS A BASIC AND IMPORTANT FEATURE OF EXPENSE. 28. AS OBSERVED HERE ABOVE SINCE THE AR HAS AGREED TO HAVE IT VERIFI ED BY THE AO, WE ARE SETTING ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE AND RESTORIN G THE SAME TO THE AO, WHO WILL TAKE AN APPROPRIATE DECISION AFTER ACCORDING TO THE ASSESSEE REASONABLE AND ADEQUATE OPPORTUNITY TO PRESENT ITS CASE. 29. GROUND NO. 4 IT IS THEREFORE, ALLOW FOR STATISTICAL PUR POSES. THUS , IT WAS THE OBSERVATION OF THE BENCH THAT DRILLING ACTIVITY COULD NOT BE SEPA RATED FROM PROSPECTI N G ACTIVITY . THE MINE RALS ARE DOWN TO THE EARTH S CRUST AND WITHOUT DRILLING , THE OPERATIONS OF PRO SPE CTING AND EXPLORATION COULD NOT BE CARRIED O UT. IN THE ABOVE BACKGROUND , LD.AO WAS DIR ECTED TO VERIFY THE EXPENSES AND VARIOUS DETAILS AFTER CONSIDERING RELEVANT CLAUSES OF THE AGREEMENT . ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 3 ASSESSM ENT PROCEEDINGS 2.1 PURSUA N T TO THESE DIRECTIONS, A N A SSE SSM ENT O R DER HAS BEEN PASSED BY LD.AO U/S 143(3 ) R .W.S. 254 O N 31/03/2016. IT TRANSPIRED THAT THE A SSESSE E HAD CLAIMED AN EXPENDITURE OF RS. 757.80 LACS U/S 42 O F THE ACT. DURING SET - ASIDE PROCEEDINGS, THE ASSESSEE REFERRED TO IT S LETTER DATED 16 /03/2015 WH EREIN TH E PARTY - WISE DETAILS OF EXPLORATION AND DEVELOPMENT EXPENSES WERE FURNI SHED. T HE ASSESSEE SUBMITTED THAT TH E EXPENSES WERE AS PER PETROLEUM SHARIN G C O NTRACT (PSC) ENTERED INTO BY THE ASSESSEE, ONGC AND GSPC L WITH GOVERNMENT OF INDIA FOR BLOCK CB - ON 7 DATED 1 2/03/2000. THE RELEVANT EXTRACT FROM THE AGREEMENT WERE AL SO ATTACHED. AS PER THE RELEVANT ARTICLE 16, T HE ASSESSEE WAS TO BE ALLOWED DEDUCTION U / S 42 FOR EXP I ORATION EXPENSES. AS PER PARA 16.2.1 , FULL DEDUCTION WAS TO BE ALLOW E D FOR ALL EXPENDITU RE INCUR R ED ON EXPLORATION OPERATION AND DRILLING OPERA TION . THE SAME PARA ENVI SAGE S DEDUCTION OF EXPENDITURE INCURRED FOR DEVELOPMENT OTHER THAN EXPENDITURE INCURRED ON DRILLING AND EXPLORATION AS GENERAL EXPEND ITURE RELATING TO BUSINESS . 2.2 THE ASSESSE E SUB MIT T ED THAT THE EXPLORATION COST W O ULD INCLUDE THE COST INCURRED FOR DRILLING OF EXPLORATORY WELLS FOR FINDING OUT THE PETROLEUM AND THE APPRAISAL THEREON. S I NCE PSC PROVIDE FOR 100% DEDUCTION OF EXPLO RATION EXPENSES, THE EXPENSES D ETAILED IN THE EXPL ORATION A CTIVITIES IN ADD ITION TO DRILLING NEED TO BE CONSIDERED FOR DEDUCTION UNDER THE INCOME TAX A C T WHI CH SHOULD BE IN ADDITION TO THE EXPEN DITURE ALLOWABLE U/S 42. 2.3 THE LD. AO CONCUR RED THAT AS PER PS C , EXPLORATION COST INCLUDE S DIRECT OR INDIRECT EXPENSE S INCURRED IN SEARCH OF PETROLEUM AREA WHICH INTER - ALI A INCLUDE AERIAL, GEO PHYSICAL, GEO CHEMICAL, GEO LOGICAL TYPES O F ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 4 SURVEY AND CORE HOLE DRILLING AND WATER WELL DRILLING. SIMI LARLY, THE DEVELOPMENT COS T INCLUDES ALL DIRECT AND INDIRECT EXPEND ITUR E INCURR E D IN RESPECT TO DEVELOPMENT OF DEVELOPMENT AREA INCLUDING EXPENDITURE INCURRED FOR DRILLING DEVELOP MENT WELLS. THE DEV ELOPMENT COST ALSO INCLUDES COMPLETION OF EXPLORATION WELL BY WAY OF INSTALLATION OF CASTING OR EQUIPMENT OR OTHERWISE OR FOR THE PURPOSE OF BRINGING A WELL INTO USE AS A PRODUCING WELL FOR THE INJECTION OF WATER OR GAS TO ENHANCE RECOVE RY OF PETROLEUM AND RE - ENTRY COMPLETION OF WORKING O V ER THE E XISTING WELL. AS PER PSC, DRIL LING EXP ENSES COULD BE INCURRED FOR EXPLORATION AS WELL A S DEVELO P MENT ACTIVITIES . THOUGH THE ASSESSEE HAS FILED DETAILS OF EXPENSES INCURRED AS PER PSC , HOWEVER, IT HAS FAILED TO ESTABLISH THAT EXPENDITURE WAS INCURRED FOR EXPLORATION OR DEVELOPMENT AS THE COMMERCIAL PRODUCTION OF WELLS HAD ALREADY STARTED AND THE ABOV E EXPENSES INCURRED WERE AFTER THE STARTING OF COMMERCIAL PRODUCTION. THEREFORE, THE EXPENDITURE WO ULD NOT QUALIFY FOR DEDUCTION U/S. 42 SINCE PRODUCTION FROM WELLS HAD ALREADY STARTED AND EXPENDITURE WAS FOR ENHANCEMENT OF PRODUCTIVITY. THEREFORE , THE AM O UNTS WOULD NOT QUALIF Y AS EXPENDITURE INCURRED FOR EXPLORATION ACTIVITY RATHER IT WOULD BE DEVELOPMENT EX PENDITURE. 2.4 IN T HE OPINION OF LD. AO, SEC . 42 IS A SPECIAL PROVISION WHICH PROVIDES FOR DEDUCTION OF EXPENDITU RE INC URRED ON PRO SPECTING , EXTRACTI N G OR PRODUCTION OF MINERAL OIL. AS AGAINST THIS , THE ASSESSEE HAD INCURRED EXPENDITURE ON THE EXISTING WE LL WHICH HAS ALREADY STARTED COMMERCIAL PRODUCTION. SIMI LAR VIEW WAS TAKEN IN A Y 2006 - 07 WHICH WAS CONFIRMED BY LEARNED FIRST APPELLATE AUTHOR ITY. THE REFORE, THE DEDUCTION OF THE EXPENDITURE WAS F INALLY DENIED TO THE ASSESSEE. ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 5 APPELLATE PROCEEDINGS 3.1 DURING APP ELLATE PROCEE DING S, THE ASSESSEE PLEADED THAT DEDUCTION IN RESPECT OF EXPENSES INCURRED F OR EXPLORATION AND DRILLING IS ALLOWABLE EVE N AFTER C OMMENCEMENT OF COMMERCIAL PRODUCTION. THE LD. AR ALSO SUBMITTED THAT P URSUANT TO THE DIRECTIONS OF TRIBUNAL FOR AY 2009 - 10, LD. AO ALLOWED SIMILAR CLAIM U /S. 42( 1 )(B). THE ASSESSEE ALSO SUBMITTED THAT IT INCURRED VARIOUS EXPENSES FOR EXPLORATION A ND DEVEL O PMENT BEFORE THE BLOCKS WERE PUT ON CO MMERCIAL PRODUCTION. THE EXPENSES INCURRED BY THE COMPANY WERE AS PER THE PS C . THE DETAILS OF THE EXPENDITURE WERE AS FOLLOWS: - PARTICULARS OF THE CLAIM BLOCK AMOUNT (RS. ) PERCENTAGE OF SHARE I N JV DRIL LING & E X PLORATION PALE J 6 ,70, 62 , 762 50% (E), 35%(D) DRILLING NORTH BALOL (69,629) 25% DRILLING PY - 3 87,86,971 21% TOTAL 7,57,80,104 IT WAS SUBMITTED THAT THE EXPENSES WERE RELATED TO DR ILLING, EXPLORATION ACTIVITIES AND CERTAIN SERVICES NE CESSARY T O CONTINUE ONGOING ACTIVITIES IN ACCORDANCE WITH THE PSC . AS PE R THE TERMS OF P SC, THE A SSESSEE IS ALLOWED TO CLAIM DEDUCTION U/S 42 IN RESPECT OF ALL THE B LOCK EXPENSES. THE A SSESSEE SUBMITTED THAT THE PROVISIONS OF SEC. 42 ( 1 ) ( B) PROVI DE FOR DEDU CTION OF EXPENDITURE INCURRED F OR EXPLORATION, DEVELOPMENT, PRODUCTION AND RELATED SERVICES IN THE BLOCK WHETHER INC URRED B EFORE OR AFTER THE COMMENCEMENT OF COMMERCIAL PRODUCTION . 3.2 THE LD. CIT(A) NOTED THAT THE DEDUCTION WA S DENIED D UE TO THE FACT THA T THE EX P ENDITURE WAS INCURRED AFTER ST ART OF COMMERCIAL ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 6 PRODUCTION AND FURTHER DUE TO THE FACT THAT THE ASSESSEE F AILED TO FILE THE DETAI LS OF THE SA ME. THE ASSESSEE MAD E CONFLICTING STATEMENTS DURING ORIGINAL ASSESSM ENT PROCEEDINGS AS WELL AS DURING SET - ASIDE PR O CEEDING S A ND THEREFORE, THE CLAIM WAS NOT A LLOWABLE. ALTERNATI VEL Y, THE ASSESSEE FAILED TO ESTABLISH THAT THE ENTI RE EXPENSES WERE INCURRED FOR EXPLORATION AND DRILLIN G OPERATIONS AND THEREFO RE, THE R ELIANCE ON THE O RDER FOR AY 2009 - 10 WAS MISPLAC ED. F INA L LY, THE ACTION OF LD. AO WAS CONFIRMED . AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH FOLLOWING GROU NDS OF APPEAL: - 1 .1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON 'BLE COMMISSIONER OF INCOME TAX APPEALS - 20 ( 'THE HON ' BLE CIT(A ) ') ERRED IN UPHOLDING THE DISALLOWANCE OF EXPENDITURE INCURRED BY THE APPELLANT IN RESPECT OF EXPLORATIO N AND DRILLING ACTIVITIES AND RELATED SERVICES OF RS.7,57,80,104 U/S 42(1)(B) OF THE ACT , CONSIDERING THE SAME AS EXPENDITURE INCURRE D FOR TH E RELEVANT BLOCKS AFTER THE COMMENCEMENT OF COMMERCIAL PRODUCTION. 1.2. ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT CONSIDERING THE FACTS THAT THE EXPENDITU RE U/S 42(1) ( B) OF THE ACT WERE ACCOUNTED UND ER THE H E AD 'DEVELOPMENT' EXPENDITURE AND WITHOUT APPRECIATING THE FACTS THAT ALL EXPENDITURE WERE INCURRED IN RESPECT OF D RILLING ACTIVITIES AND RELATED SERVICES, WHICH WERE ALLOWABLE AS PER THE ACT AND THE PRO DUCTION SHARING CONTRACT ( PSC). 1.3. ON T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT CONSIDERING THE FACTS THAT THE APPELLANT HAD FILED ALL THE RELEVANT DETAILS DURING COURSE OF HEARING BEFORE THE LEANED AO IN RE SPECT OF EXPENSES CLAIMED AS EXPLORATION EXPEN SES U/S 4 2(1)(B) OF THE ACT. 1.4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NO T APPRECIATING THE LANGUAGE USED IN SECTION 42(1 )(B) OF THE ACT THAT AFTER THE BEGINNIN G OF THE COMMERCIAL PRODUCTION, ANY EXPENDITUR E INCURR E D, WHETHER BEFORE OR AFTER STARTING OF THE COMMERCIAL PRODUCTION, IN RESPECT OF DRILLING OR EXPLORATION ACTIVITIES IS TO BE ALLOWED U/S 42(1)(B) OF THE ACT. 1.5. WITHOUT PREJUDICE TO THE ABOVE, ON T HE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E HON'BLE CIT(A) ERRED IN DISALLOWING THE APPELLANT'S CLAIM U/S 42(1)(B) OF THE ACT WITHOUT BRINGING ANY ADVERSE EVIDENCE ON RECORDS OF SUCH DISALLOWANCE MADE IN THE HANDS OF ANY JOINT VENTURE PARTY, AS THE APPELLANT WAS ONE OF THE PARTIES TO THE J OINT VEN TURE. 1.6. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN DISALLOWING THE APPELLANT'S CLAIM U/S 42(1 )(B) OF THE ACT WITHOUT CONSIDER I NG THE FACTS THAT IN PRECEDING YEAR AY 2006 - 07 AND S UBSEQUENT YEAR AY 2009 - 10, THE SIMILAR NATURE OF EXPENSES WAS ALLOWED AS DEDUCTION WHILE PASSING OGE TO ITAT ORDER AS PER THE DIRECTIONS GIVEN BY HON'BLE ITAT IN THESE RESPECTIVE YEARS. ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 7 OUR FINDI NGS & A DJUDICATION 4. UPON PERU SAL O F ASSESSMENT O RDER, WE FIND THAT THE MAIN REASON TO DENY THE DEDUCTION OF EXPENDITURE IS THE CONCLUSION OF LD. AO THAT E XPE NSES INCURRED FOR EXPLORATION OR DEVELOPMENT WERE AFTER THE STAR T OF COMMERCIAL PRODUCTION AND THEREFORE, THE EXPENDITU RE WOULD NOT QUALIFY FOR DED UCTION U /S 42 . THE EXPENDITURE WAS FOR ENHANCEMENT OF PRODUCTIVITY. SIMI LAR VIEW W AS STATED TO BE TAKEN IN AY 2006 - 07. 5. WE FIND THAT THE PROVISIONS O F SEC.42 ARE SPECIAL PROVISIONS FOR DEDUCTION IN CASE OF PROSPECTIN G ETC. O F MINERAL OIL. THES E PROVISIO NS PROVI DE THAT FOR THE PURPOSE OF COMPUTING THE PROFITS OR GAINS OF ANY BUSINESS CONSISTING OF THE PROSPECTING FOR OR EXTRACTION OR PRODUCTION OF MINERAL OILS ETC. AS PER THE AGREEMENT, THE ASSESSEE SHALL BE ALLOWED ALLOWANCES AS SPECIFIED IN THE AGREEMEN T . SUCH ALLOWANCES, AS PER C LAUSE (B) OF S UB - SECTION (1) OF SEC.42 , WOULD BE AFTER THE BEGINNING OF COMMERCIAL PRODUCTION AND WITH RESPECT TO EXPENDITURE INCURRED B Y THE ASSESSEE , WHETHER BEFORE OR AFTER SUCH COMMERCIAL PRODUCTION , OF EXP ENDITURE RELATING T O DRILL ING AND EXPLORATION ACTIVITIES OR SERVICES ETC. IT COULD BE SEEN THAT THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE ON EXISTING WELLS AFTE R THE COMMENCEMENT OF COMMERCIAL PRODUCTION AND HENCE, THE SAME IS ALLOWABLE AS PER THE PROVISIONS OF THE AC T . 6. WE FIND T HA T SIMILAR ISSUE AROSE IN ASSE SSEE S CASE FOR AY 2009 - 10 BEFORE THIS TRIBUNAL VIDE ITA NO.6118 , 6424 /MUM/2014 O RDER DATED 15/02/2017 WHEREIN THE MATTER WA S REMIT TED BACK TO THE FILE OF LD. AO FOR RE - ADJUDICATION. IN THE S ET ASIDE PROCEED ING, ORD ER WAS PASSED BY LD. AO ON 10 /11/2017 WHEREIN DEDUCTION OF EXPENDITURE WAS ALLOWED TO THE ASSESSEE AS PER THE PROVISIONS OF S EC . 42(1)(B) . ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 8 SIMI LAR WAS THE POSITION IN AY 2006 - 07 WHERE IN IN THE SET - ASIDE PROCEEDINGS, LD. AO ALLOWED SIMILAR DEDUCTION VIDE ORD ER DATED 17/11/2017. 7. PROCEEDING FUR THER, IT COULD BE S EEN THAT D U RING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED PARTY - W ISE DETA ILS OF EXPLORATION AND DEVELOPMENT EXPENSES. THESE EXPENSES WER E I N ACCORDANCE WITH PETRO LEUM SHARING CONTR ACT (P SC) ENTE RED INTO BY TH E ASSESSE E WITH GOVERNMENT OF INDIA FO R BLOCK CB - ON7. AS PER PARA - 16.2 .1 OF PSC, THE ASSESSEE WAS TO BE ALLOWE D DEDU CT ION FOR ALL EXPENDITURE IN RESPECT OF EXPLORATION AND DRILLING OPERATIONS. THE EXPENSES INCURRED ON DEVELOPMENT OTHE R THAN D RILLING AND EXPLORATION WERE T O BE ALLOWED AS GENERAL DEDUCTION. THEREFORE, THERE COU LD BE NO OCCASION TO DISALLOW ASSESSEE S C LAIM. 8. IN VIEW OF THE FOREGOING, WE DIRECT LD. AO TO ALLOW THE DED UCTION OF IMPUGNED EXPENDITURE. 9. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. O RDER PRONOUNCED ON 26 TH JULY 2021 SD/ - SD/ - ( AMARJIT SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 26/07/2021 SR.PS, DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE ITA NO. 2545 /MUM/2019 M/S HINDUSTAN OIL EXPLORATION COMPANY LTD. A SSESSMENT YEAR: 20 07 - 08 9 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MU MB AI.