Commercial production of mineral oil as per sec. 80IB (9) involves the activity of extracting oil from underneath of surface and transport it for sale

ITO Vs. Hindustan Oil Exploration Co. Ltd. (ITAT Mumbai)– Definition given in Explanation to sec. 42, section 293A as well as in various clauses of Production Sharing Contract it does not require to undergo any process of any physical or composition change but after the process of separation of gas, water and other sedimentary elements become commercial commodity. Therefore, commercial production of mineral oil as per sec. 80IB (9) involves the activity of extracting oil from underneath of surface and transport it for sale and nothing else.

Even otherwise, as per Production Sharing Contract, the massessee and other joint ventures have to explore, develop, extract and deliver the crude oil. This process includes distillation and separation of verified natural gas. Therefore, as per the agreement, the assessee is bound to perform its part and once the assessee is carried its operation in accordance with the terms and conditions of the said Agreement with the Govt. the benefit of the deduction u/s 80IB is allowable to the assessee.”

INCOME TAX APPELLATE TRIBUNAL, MUMBAI
ITA No. 6477/Mum./2009 –  (Assessment Year: 2003- 04)
ITA No. 2346/Mum./2010 –  (Assessment Year: 2004- 05)

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