Beruflich Dokumente
Kultur Dokumente
.....APPELLANT(S)
VERSUS
UNION OF INDIA & ORS.
.....RESPONDENT(S)
JUDGMENT
A.K. SIKRI, J.
Present appeal impugnes the judgment and order dated
28.05.2012 passed by the High Court of Delhi, thereby dismissing
the writ petition which was filed by the appellant. It so happened
that the appellant had entered into two contracts dated
20.02.1995 with the Union of India, through Ministry of Petroleum
and Natural Gas (MoPNG) in the year 1992 relating to exploration
of certain oil fields which the Union of India had selected in
Gujarat and other States. These contracts were on production
sharing basis for Dholka and Wavel Oil Fields respectively. It
started the production after entering into the contract and filed its
income tax return on the income generated from the aforesaid
Civil Appeal No. 6929 of 2012
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Page1
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Page2
(ii)
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Page3
(iii)
3)
This writ petition which has been dismissed by the High Court
vide impugned judgment dated 28.05.2012 holding that the
appellant is not entitled to any deductions under Section 42 of the
Act in the absence of stipulations to this effect in the Contracts
signed between the parties. This decision is the subject matter of
challenge before us in the present appeal.
4)
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Page4
7)
The appellant (along with its erstwhile joint venture partner Larsen
and Toubro Ltd., whose stake was also subsequently acquired by
the appellant) submitted its bid dated 29.03.1993 in response to
the 1992 NIT.
8)
The appellant was allotted the Dholka abnd Wavel Oil Fields in
Gujarat near Ahmedabad, by the MoPNG. Two production sharing
contracts, each dated 20.02.1995, were executed by the appellant
with the MoPNG for Dholka and Wavel Oil Fields, respectively
(the Two PSCs). According to the appellant, since no
amendments to Article 16 of MPSC had been suggested nor
contemplated b y the Union of India, it was (and is) the belief and
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10)
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Page7
(b)
(c)
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(b)
12)
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Director
of
Income-Tax
(International
Taxation),
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Page10
However, MoF did not issue any such clarification. In the absence
of such a clarification from the Ministry of Finance, the ADIT
disallowed appellant's claim for deduction under Section 42(1)(b)
and Section 42(1)(c) of the Income Tax Act, made in the
appellant's
Income-Tax
Return
for
the
Assessment
Year
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Page11
16)
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As, in the meantime, the ADIT was going ahead with the
proceedings pursuant to the notice under Section 148 of the Act
deciding to reopen the assessment of the appellant in respect of
assessment years 2001-02 to 2004-05, the appellant sent one
more representation dated 23.06.2008 on the same lines on
which it had been making the similar representations earlier. No
positive response was, however, received. Exasperated, the
appellant approached the High Court by way of writ petition under
Article 226 of the Constitution. Counter affidavits to the writ
petition was filed by the respondent Authorities taking
preliminary objection pertaining to territorial jurisdiction of the High
Court of Delhi and also raising the ground of alternate remedies
available in the law in the form of appeal before the ITAT which
had already been preferred by the appellant. Rejoinder thereto
was filed by the appellant. Thereafter, another counter affidavit on
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Page13
Thereafter,
the
respondent
filed
another
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Page14
The matter was ultimately heard by the High Court which has
dismissed the writ petition by passing detailed judgment on
28.05.2012. Before we come to the arguments of the appellant
challenging the correctness of this judgment, it may be
appropriate to take note of reasons which have been given by the
High Court in support of the view it has taken.
IMPUGNED JUDGMENT
19)
The High Court took note of the basic and primary contention of
the appellant which was that there was a clear understanding
between the MoPNG and the appellant that in the contract to be
signed between the parties benefits under Section 42 of the Act
would be admissible. The NIT issued by the Government was
based on this basic understanding but due to inadvertent
oversight and error on the part of the MoPNG the contract, which
was ultimately signed, omitted to include such a clause.
Therefore, on account of mistake of the Ministry, which even it
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Page15
It may be pertinent to point out that the High Court did not accept
the preliminary objections raised by the respondent and after
repelling the same, it adverted to the subject matter of the writ
petitions. On the merits of the issue involved, the High Court
formulated two questions . These are:
(1) Whether benefit under Section 42 of the Act was
envisaged in the 1992 NIT and in the PSCs, but due
to oversight or mistake, the same was not included
and mentioned in the written contract, and if so, the
effect thereof?
(2) If the question is decided in favour of the
appellant, the second aspect is whether a direction
can be issued for grant of benefit under Section 42 of
the Act to the appellant, with a further direction that
the contract should be laid before the Parliament
after incorporating the said clause?
21)
Dealing with the first question, High Court rejected the plea of the
appellant that 1992 NIT included and referred to the MPSC as
incorrect. It is pointed out that the 1992 NIT did not refer to the
MPSC and did not stipulate that MPSC shall form part of the
tender documents. It is further stated by the High Court that in
1992 NII, there was no reference to MPSC or that the terms and
conditions of the MPSC shall be included in, or be a part of, the
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Page16
The High Court further pointed out that there was no letter or
correspondence written by the appellant from 1995 onwards
stating that non-inclusion of Section 42 benefit was due to
oversight. Insofar as three letters written by the MoPNG, namely,
letters dated 17-06-2005, 11-04-2007 and 28-04-2008 are
concerned wherein this Ministry admitted that there was an
unintentional lapse and omission in not incorporating the provision
of admissible deduction under Section 42 of the Act, the High
Court
has
brushed
aside
these
communications
as
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Page17
It
is
further
mentioned
that
these
are
not
The High Court has also commented that though in these letters it
is mentioned that Section 42 deductions were omitted by
oversight in fact there was no such oversight in as much as the
MoPNG itself in its counter affidavit has specifically stated that no
such benefit was envisaged, considered or granted at the time
when the PSCs were negotiated and awarded. Averments made
in this behalf in the counter affidavit filed by the MoPNG are
extensively quoted. To verify this position, the High Court also
examined and went through the original files relating to
preparation and finalisation of tender documents and made
following remarks in this behalf.
In order to verify and examine the correct factual
position, we had asked the respondent Ministry of
Petroleum and oversight in as much as the MoPNG
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Page18
24)
respect of undiscovered oil fields and for this reason benefit under
Section 42 had been granted to them.
25)
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Page19
27)
(a) The Ministry of Petroleum & Natural Gas (MoPNG) had invited bids
Civil Appeal No. 6929 of 2012
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Page20
The appellant's bids for the said two oilfields were clearly and
indisputably submitted on the footing that the MPSC would govern
the contract between the parties. In fact, in its bid, the appellant
only referred to those clauses of the MPSC which the appellant
wanted to be slightly modified, to which the Government had no
objection. Thus, the appellant's bids were on the basis of the
MPSC which provided the benefit of Section 42.
(c) Respondent no. 1 itself admitted that the contract was entered into,
keeping in view the stipulations/terms contained in the MPSC
and, therefore, MPSC had to be read into the contract. It was
also argued that these facts were specifically confirmed by
respondent no. 1 itself in its three letters dated
17-06-2005,
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Page21
(e) The accounts of the venture were drawn up on the footing that the
deductions
under
Sect5ion
42
were
available
and
that,
clearly
established
that
the
intention
of
the
untraversed,
the
same
has
been
completely
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28)
29)
letters. His
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submission was that right upto the year 2005, the benefit of
Section 42 was extended to the appellant and, therefore, there
was no occasion for the appellant to approach respondent no. 1
to ask for such a clarification. He further submitted that reliance
placed by the High Court on certain paras of the counter affidavit
of respondent no. 1 was totally erroneous as such a stand taken
in the counter affidavit was contrary to the letters which were
addressed by the respondent no. 1 itself to the MoF but according
to him, the manner in which the plea of discrimination was dealt
with by the High Court was also erroneous ignoring the specific
plea taken by the appellant in its additional affidavit dated
28-02-2012 giving particulars of a number of small-sized oil fields
to which Section 42 benefit was given and the Government had
not controverted those averments. He submitted that apart from
the plea, 13 oil fields (which included the appellant) all other oil
fields, whether large, medium or small sized, and whether
discovered or exploratory, were given the benefit of Section 42 of
the Act. Therefore, the respondents had acted in a grossly
arbitrary and discriminatory manner.
30)
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Page24
Section 42 of the Act was not even gone into, though, it was
specifically argued. He further submitted that when the other
contracting parties, namely, MoPNG specifically admitted that this
provision was left our inadvertently, the Court should have given a
direction for amendment of the Contract. In order to support his
submission that such a direction can be issued by the High Court
in exercise of its powers under Article 226 of the Constitution, he
referred to the following judgments:
31)
(i)
(ii)
(iii)
(iv)
Mr. Arijit Prasad, Advocate, who appeared for all the respondents
countered
the
aforesaid
submissions
emphatically
and
2
3
4
5
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Page25
tax authorities were supposed to look into the PSCs only and as
far as the contracts between the Government and the appellant
are concerned, admittedly there was no such stipulation therein.
Nor these contracts were placed before both the House of
Parliament. Therefore, the order of the Assessing Authorities in
tune with legal provisions. He further submitted that in any case
the appeal of the appellant was pending before the ITAT and it
was for the ITAT to go into the submissions made by the
appellants on the admissibility of deduction under Section 42 of
the Act.
32)
33)
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the law of contract and not on the basis of the administrative law,
he referred to and relied upon the judgments in Pradeep Kumar
Sharma v. U.P. Finance Corporation6 and A.B.L. International
Limited (supra).
35)
From the reading of the writ petition filed in the High Court, the
impugned judgment rendered by the High Court thereupon, and
also having regard to the arguments advanced before us which
have already been taken note of, it is apparent that the fulcrum of
the issue, which has to be focused and to be answered, pertains
to the benefit of the deductions permissible under Section 42 of
the Act. In fact, as is clear from the prayers made by the appellant
in the writ petition, the very first direction which the appellant
sought was to declare that the appellant is entitled to such
deductions in terms of the two PSCs dated 20-02-1995. Incidental
issues, while deciding the aforesaid primary issue, which arises
relate to the construction of the terms of the said PSCs and also
the nature of the contracts which the parties intended to. Another
issue relates to the jurisdiction of the High Court under Article
226 of the Constitution to pass Mandamus for amending the
PSCs. All these issues are formulated in the precise form
hereunder:
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(i)
(ii)
(iii)
(iv)
(v)
36)
37)
Answer to question No. (i) First and foremost aspect which has
to be kept in mind while answering this issue is that the Income
Tax Authorities while making assessment of income of any
assessee have to apply the provisions of the Income Tax Act and
make assessment accordingly. Translating this as general
proposition contextually, what we intend to convey is that the
Assessing Officer is supposed to focus on Section 42 of the Act
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We would also like to point out, at this juncture itself, that this
Court held in CIT v. Enron Expat Service Inc.8 that the mere fact
that the assessee had offered to pay tax under Section 44 (BB) of
the Act in some of the earlier years will not operate as an estoppel
to claim the benefit of Double Taxation Avoidance Agreement
(DTAA), where the assessee operates under the same PSC
which was before the Court. While holding so, the Court had
followed its earlier judgment in the case of Enron Oil and Gas
7
8
(2008) 15 SCC 33
(2010) 327 ITR 626
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41)
42)
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It is rather made
xxx
xxx
Article 1.18
Contract means this agreement and
the Appendices mentioned herein and attached hereto
and made an integral part hereof and any amendments
made thereto pursuant to the terms hereof.
Article 32 - ENTIRE AGREEMENT, AMENDMENTS,
WAIVER AND MISCELLANEOUS
32.1
32.2
32.3
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Page35
44)
32.4
32.5
32.6
had
no
option
but
to
deny
the
benefit
of
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Page36
46)
Tax
Authorities
in
giving
benefit
of
these
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Page38
Our first remark is that the approach of the High Court in dealing
with this aspect may not be entirely correct. In the first instance, it
has embarked upon the issue as to whether such an omission
was by way of oversight or it was unintentional. While
undertaking this enquiry, it has side tracked the language of the
three letters and instead gone by the stand taken in the counter
affidavit filed by respondent no. 1 where, in para 4 of the counter
affidavit, respondent no. 1 pleaded to the contrary. Clearly, the
said stand taken in the counter affidavit filed in the High Court
was contrary to the contents of the three letters dated 17.06.2005,
11.04.2007 and 28.04.2008. Significantly, respondent no. 1
neither disowned those letters nor tried to explain away those
letters. No plea was raised to the effect that the person who wrote
those letters was not authorized to do so or he had taken the said
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question accordingly.
50)
51)
facets, namely:
(i)
(ii)
(iii)
52)
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Page41
effect
to.
We
have
already
held
that
all
such
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Page42
54)
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58)
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Page45
of
installments
initially
stated
in
the
brochure.
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Page46
India11 allowed the writ petition by observing as under :"It has not been disputed that the contesting opposite
party is included within the term `other authority'
mentioned under Article 12 of the constitution.
Therefore, the contesting opposite parties cannot be
permitted to act arbitrarily with the principle which
meets the test of reason and relevance. Where an
authority appears acting unreasonably, this court is
not powerless and a writ of mandamus can be issued
for performing its duty free from arbitrariness or
unreasonableness.
60)
In appeal filed by the Authority, this Court, on facts, noted that the
respondents had applied for registration only by acceptance of
terms and conditions contained in the brochure. Moreover,
subsequently letter was written by the Authority about the
enhancement of the cost of the houses/flats as well as increase in
monthly installments. Rate of yearly interest requesting allottees
to give their written acceptance and the respondents except
respondent No.4 had sent their written acceptance and it was on
the basis of the written acceptance that name of first respondent
was included in the draw and he was successful in getting
allotment of a particular house. The court observed that
respondents were under no obligation to seek allotment of house/
flats even if they had registered themselves. Notwithstanding, the
voluntarily registered themselves as applicants only after fully
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62)
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63)
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64)
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66)
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67)
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following manner:
27. From the above discussion of ours, following
legal principles emerge as to the maintainability of
a writ petition :(a) In an appropriate case, a writ petition as against
a State or an instrumentality of a State arising out
of a contractual obligation is maintainable.
(b) Merely because some disputed questions of
facts arise for consideration, same cannot be a
ground to refuse to entertain a writ petition in all
cases as a matter of rule.
(c) A writ petition involving a consequential relief of
monetary claim is also maintainable.
28. However, while entertaining an objection as to
the maintainability of a writ petition under Article
226 of the Constitution of India, the court should
bear in mind the fact that the power to issue
prerogative writs under Article 226 of the
Constitution is plenary in nature and is not limited
by any other provisions of the Constitution. The
High Court having regard to the facts of the case,
has a discretion to entertain or not to entertain a
writ petition. The Court has imposed upon itself
certain restrictions in the exercise of this power
[See: Whirlpool Corporation vs. Registrar of Trade
Marks, Mumbai & Ors. [1998 (8) SCC 1]. And this
plenary right of the High Court to issue a
prerogative writ will not normally be exercised by
the Court to the exclusion of other available
remedies unless such action of the State or its
instrumentality is arbitrary and unreasonable so as
to violate the constitutional mandate of Article 14 or
for other valid and legitimate reasons, for which the
court thinks it necessary to exercise the said
jurisdiction."
68)
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Page59
69)
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damages.
(vii) Writ can be issued where there is executive action
unsupported by law or even in respect of a corporation there is
denial of equality before law or equal protection of law or if can be
shown that action of the public authorities was without giving any
hearing and violation of principles of natural justice after holding
that action could not have been taken without observing principles
of natural justice.
(viii)
If
the
contract
between
private
party
and
the
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71)
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72)
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.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
MAY 14, 2015.
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