Vedanta Limited Vs ADIT (Madras High Court)
The Madras High Court heard cross appeals filed by the assessee and the Revenue against the common order of the Income Tax Appellate Tribunal (ITAT), Chennai, dated 22.08.2012, relating to Assessment Years (AYs) 2002-03 and 2004-05. The principal issue in the appeals was the allowability of deductions claimed towards provision for site restoration expenses.
The assessee filed appeals under Section 260-A of the Income Tax Act, 1961 against the ITAT’s order for AYs 2002-03 and 2004-05. The Revenue also filed separate appeals under Section 260-A against the same common order of the Tribunal for the corresponding assessment years.
The assessee, Cairn Energy India Pvt. Limited (CEIL), was a non-resident company incorporated in New South Wales, Australia, engaged in the prospecting and production of mineral oil and, in certain cases, gas in India through its project office at Chennai. It was a wholly owned subsidiary of Cairn Energy Asia Limited (CEAL), an Australian company.
The dispute arose from the Assessing Officer’s disallowance of the assessee’s claim for deduction of provision for site restoration expenses amounting to ₹6,84,14,348 for AY 2002-03 and ₹6,82,24,247 for AY 2004-05.
The substantial questions of law raised in the assessee’s appeals included whether the provision for site restoration costs was an allowable deduction under the Act, whether the deduction was allowable under Section 37(1) read with Section 42, whether the Tribunal had correctly rejected the claim without assigning reasons, and whether the liability represented an ascertained liability in light of the principles laid down in Calcutta Co. Ltd. v. CIT and Bharat Earth Movers Ltd. v. CIT.
