Oil and Natural Gas Corporation Ltd. vs. CIT (2015) 377 ITR 117(SC)
Section 24AA of the Surtax Act, vests in the Central Government the power to make exemption, reduction in rate or other modification in respect of surtax in favour of any class of foreign companies which are specified in s/s. (2), in regard to the whole or any part of the chargeable profits liable to tax under the Surtax Act. Sub-section (2) of section 24AA refers to two categories of foreign companies. The first is foreign companies with whom the Central Government has entered into agreements for association or participation, including participation by any authorised person, in any business consisting of the prospecting or extraction or production of mineral oils. The second category of foreign companies mentioned in s/s. (2) is foreign companies that may be providing services or facilities or supplying any ship, aircraft, machinery or plant in connection with any business of prospecting or extraction or production of mineral oils carried on by the Central Government or any authorised person. Specifically the section states that mineral oils will include petroleum and natural gas.
The exemption notification bearing No. G. S. R. 307(E), dated 31st March, 1983, specifically grants exemption in respect of surtax in favour of foreign companies with whom the Central Government has entered into agreements for association or participation of that Government or any authorised person in the business of prospecting or extraction or production of mineral oils.
The ONGC had executed agreements with different foreign companies for services or facilities or for supply of ship, aircraft, machinery and plant, as may be, all of which were to be used in connection with the prospecting or extraction or production of mineral oils. Such agreements did not contemplate a direct association or participation of the ONGC in the prospecting or extraction or production of mineral oils but involved the taking of services and facilities or use of plant or machinery which is connected with the business of prospecting or extraction or production of mineral oils.
In the above situation, the primary authority took the view that the agreements executed by the ONGC with the foreign companies being for services to be rendered and such agreements not being for association or participation in the prospecting or extraction or production of mineral oils, would not be covered by the exemption notification in question which by its very language granted exemption only to foreign companies with whom there were agreements for participation by the Central Government or the person authorised in the business of prospecting, extraction or production of mineral oils. The agreements in question, according to assessing authority, were, therefore “service agreements” and, hence, covered by sub-section (2)(b) of section 24AA of the Surtax Act and were, accordingly, beyond the purview of the exemption modification.
The said view was reversed by the learned Appellate Commissioner and upheld by the learned Income-tax Appellate Tribunal. In the appeal u/s. 260A of the Act, the High Court of Uttarakhand overturned the view taken by the Appellate Commissioner and the learned Tribunal.
The Supreme Court held that section 24AA of the Surtax Act vests power in the Central Government, inter-alia, to grant exemption to foreign companies with whom agreements have been executed by the Central Government for association or participation in the prospecting or extraction or production of mineral oils and also to foreign companies who are providing support services or facilities or making available plant and machinery in connection with the business of prospecting or extraction or production of mineral oils in which the Central Government or an authorised person is associated. In other words, the power to grant exemption is two-fold and covers agreements directly associated with the prospecting or extraction or production of mineral oils or contracts facilitating or making available services in connection with such a business. There is nothing in the provisions of the Act which could have debarred the Central Government from granting exemptions to both categories of foreign companies mentioned above or to confine the grant of exemption to any one or a specified category of foreign companies. The Notification No. G. S. R. 307(E), dated 31st March, 1983, however grants exemption only to foreign companies with whom the Central Government had executed agreements for direct association or participation by the Central Government or the person authorised by it (ONGC) in the prospecting or extraction or production of mineral oils. In other words, the exemption notification confines or restricts the scope of the exemption to only one category of foreign companies which has been specifically enumerated in sub-section (2)(a) of section 24AA of the Surtax Act. The Second category of foreign companies that may be providing services as enumerated in sub-section (2)(b) of section 24AA is specifically omitted in the exemption notification. The power u/s. 24AA of the Surtax Act, is wide enough to include even this category of foreign companies. The omission of this particular category of foreign companies in the exemption notification, notwithstanding the wide amplitude and availability of the power u/s. 24AA, clearly reflects a conscious decision on the part of the Central Government to confine the scope of the exemption notification to only those foreign companies that are enumerated in and covered by sub-section 2(a) of section 24AA of the Surtax Act.
The Supreme Court affirmed the orders of the High Court and dismissed the appeals.
