Issue- Whether the insertion of sub clause (iv) in Section 80-IB(9) of the Income Tax Act, 1961, by Finance (No.2) Act, 2009 conferring the benefit of the deduction under this Section to undertakings engaged in commercial production of natural gas in blocks licensed under VIIIth round of bidding provided such commercial production commenced on or after 1.4.2009 results in denial of the benefit of deduction under 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to NELP VIII on an interpretation thereof that the term “mineral oil” would not include natural gas since the benefit was available only to undertakings engaged in commercial production of “mineral oil” rendered the newly added sub clause (iv) unconstitutional and ultra vires Article 14 of the Constitution of India?
Held by High Court
In this backdrop, one has to now consider whether insertion of Explanation by Finance (No.2) Act, 2009 with retrospective application from 1.4.2000 would be valid and sustainable in law. The above analysis would indicate that though the expression “Undertaking” has not been defined under the Act, it has acquired a well defined meaning through consistent judicial decisions commencing from Textile Machinery case. The expression ‘Undertaking’ is used in various provisions of the Act, while conferring the benefits under different schemes. It is clear that commercial production of mineral oil happens from every Development Area/Field consisting of a well or cluster of wells with a Development Plan being approved for every Development Area/Field thereby making every Development Area/Field as an independent economic unit. Every Development Area/Field is thus an “Undertaking”. The Petitioner placed on record the decision of the ITAT rendered in their own case for the Assessment Year 2001- 02. The Respondent contended that this matter is under challenge in appeals before the High Court which are pending. This decision, however, has not been stayed.
Looking at the whole conspectus, it is clear that the term “Undertaking” has acquired a consistent statutory meaning. It is true that legislature is entitled to depart from this meaning and can define it the way it chooses to do so. While doing so, it has to resort to the process known to and approved by law. The explanation introduced by Finance Act (No.2) of 2009 is a departure from the settled interpretative meaning given by Courts to the expression ‘Undertaking”. Any departure, therefore, has to be through the process of validation which has to be notwithstanding any law or decision. The Explanation is not a nonobstante clause, notwithstanding any law or decision, it proceeds under the presumption that an existing ambiguity is sought to be clarified when, in reality, there is none. In fact, the usage of the expression “single” before the term ‘undertaking’ in the explanation evidences the legal understanding that the undertaking is not synonymous to assessee and an assessee can have more than one undertaking doing the same or distinct business as long as they are independent stand alone units. When, clearly there can be separate commercial discoveries for every Development Area/Field which may consists of one well or cluster of wells which makes each Development Area an “Undertaking” and this is as per the Production Sharing Contract (PSC) entered into between the Petitioner and the Central Government, there does not exist any ambiguity under the Act.
There is no ambiguity or doubt which needed to be explained by this Explanation, if uniform settled interpretation and meaning needs to be departed, the amendments sought to be carried out, can only be through the process of validation and not through insertion of an Explanation which is not in the nature of validation.