Cairn Energy Hydrocarbons Ltd., Gurgaon V. DDIT, New Delhi

MA 169/DEL/2023

AI Insights

The case revolves around the timing of the allowance of certain expenses claimed by Cairn Energy Hydrocarbons Ltd for the Assessment Years 2003-04 to 2009-10, which were disallowed in those years and were to be allowed in the year of commencement of commercial production, i.e., AY 2010-11. The assessee opted for the Vivad se Vishwas scheme, agreeing to the department's stance that these expenses should be allowed in AY 2010-11. However, a dispute arose when the Tribunal's earlier order was interpreted as finalizing these issues, leading the assessee to file a miscellaneous application for rectification. The Tribunal, upon reviewing the application and the relevant provisions of the VSV scheme, rectified its earlier order to allow the expenses in AY 2010-11, consistent with the VSV scheme and the finality of the earlier assessment orders.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131791 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-07-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 02-04-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘D’, NEW DELHI Before Sh. Saktijit Dey, Judicial Member Dr. B. R. R. Kumar, Accountant Member MA No. 169/Del/2023 (In ITA No. 6346/Del/2013: Asstt. Year: 2010-11) Cairn Energy Hydrocarbons Ltd, C/o. Cairn India Ltd, 3 rd & 4 th Floor, Vipul Plaza, Suncity, Sector-54, Gurgaon Vs. DDIT, International Taxation, Circle-3(2), New Delhi (APPELLANT) (RESPONDENT) PAN No. AACCC3279J Assessee by : Sh. Ajay Vohra, Sr. Adv Sh. Ravi Sharma, Adv Revenue by : Sh. Ram Dhan Meena, Sr. DR Date of Hearing: 07.07.2023 Date of Pronouncement: 10.07.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The Miscellaneous Application filed by the assessee reads as under:- “1. The present application is being filed under section 254(2) of the Income Tax Act, 1961 for seeking rectification and modification of the order passed under section 254(1) of the Act dated 31 January 2023 in the captioned appeal. 2. The applicant submits that the captioned appeals relate to Assessment Year 2010-11 wherein the assessee and department had filed cross appeals against the order of the Learned Commissioner of Income tax (Appeals) -42, New Delhi ['Ld. CIT(A)'] dated 10 September 2013 which were disposed by this Hon'ble Tribunal vide common order dated 31 January, 2023. 3. The Appellant in its appeal bearing I.T.A. No. 6346/Del/2013 had raised following issue before the Hon'ble Tribunal: 2 i. Ground No. 2: Allowance for past years' (AY 2003-04 to AY 2009-10) respective expenses disallowed by Ld. AO in earlier years on the ground that these are to be allowed in the year of actual commencement of commercial production i.e. AY 2010-11 which is year under reference. 4. The limited issue involved in aforesaid ground was that the Appellant in previous years (AY 2003-04 to 2008- 09) had claimed exploration expenditure, operating expenses and depreciation which were disallowed in those years by the Ld. AO on the basis that the same should be allowed in year of commencement of commercial production. There is no dispute that commercial production commenced on 20 August 2009 falling in the previous year relevant to assessment year, 2010-11. 5. Thus, the limited dispute between the Appellant and department in the said earlier years was on the issue of timing difference of allowability of above expenses- the Appellant's stand was that the said expenses should be allowed in respective previous years (Le. AY 2003-04 to AY 2009-10) and the resultant loss in those years be carried forward, whereas the Department's stand in the said previous years was that these expenses should be allowed in the year of commencement of commercial production. 6. The Appellant subsequently opted for Vivad se Vishwas (VV) scheme in the said previous years meaning thereby, that the Appellant agreed to accept the stand of department to allow the said expenses incurred during AY 2003-04 to AY 2009-10 in the year of commencement of commercial production (ie., AY 2010- 11). Ergo, the finding in the assessment orders passed in previous years (i.e. AY 2003-04 to AY 2009-10) to allow these expenses in AY 2010-11 became final upon settlement reached under VSV for AY 2003-04 to 2009-10. 7. Further, upon specific query from the Hon'ble Bench during the course of hearing, it was explained that the Ld. AO is empowered / authorised in law to pass an order giving consequential effect pursuant to VSV settlement orders as per CBDT Circular no. 3 of 2021 dated 4 March 3 2021. The copy of said Circular was subsequently submitted with the Hon'ble Bench. 8. However, while adjudicating the aforesaid issue raised vide Ground No. 2 in the assessee's appeal for AY 2010-11, the Hon'ble Bench has held in para 27 at page 19 of the order that: "27... the AO disallowed the preoperative expenses in the Assessment Years 2003-04 to 2009-10, the assessee went into appeal and subsequently opted for VSV Scheme, thus resting all the litigation. Since, the matter attained finality the payment of tax wherever applicable, this ground cannot be re-entertained at this juncture." 9. It is most humbly reiterated that pursuant to declaration under VsV scheme opted in AY 2003-04 to 2009- 10 (and not AY 2010-11) being accepted, the assessment orders for those years became final. Consequently, the Ld. AO's stand in the said earlier years to allow those expenses in AY 2010-11 has to be given effect to in the pending appeal for AY 2010-11. 10. In view of the above, it is mostly respectfully stated that there is a mistake apparent from record in para 27 of the order passed by the Hon'ble Tribunal in holding that the matter has attained finality and that the assessee was seeking to reagitate the issue in the appeal for AY 2010- 11. It is most humbly reiterated that the claim made in AY 2010-11 is consistent with the finding recorded by the Ld. AO in AY 2003-04 to 2009- 10 and consequent upon the declaration under V&V for those years being accepted. 11. The error being apparent from record, it is humbly prayed that the necessary rectification in para 27 of the order may kindly be carried out in accordance with law to direct allowance of expenditure incurred in AY 2003-04 to AY 2009-10, consistent with and in line with the Ld. AO's finding (which has become final) that such expenditure has to be allowed in the year of commencement of commercial production, viz, AY 2010- 11.” 4 2. We have gone through para 24 to 27 of the order pertaining to prior period expenses. At para 27 it was held that owing to opting VSVS Scheme, the issue of pre operative expenses stands covered. We find that as assessee has opted VSVS Scheme for the Assessment Years 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 and accordingly, the relevant appeals have been withdrawn. The AO for these years held that exploration expenditure (prior period expenditure) would be allowed u/s 42(1)(b) in the year of commencement of production. This position remains undisputed and hence, we hereby clarify that the assessee is eligible to claim the prior period expenses in the year of production as allowed by the AOs of the respective years. 3. In the result, the miscellaneous application filed by the assessee is allowed. Order Pronounced in the Open Court on 10/07/2023. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 10/07/2023 *Ajay Kumar Keot, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR