BG EXPLORATION & PRODUCTION INDIA LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, DEHRADUN

Since all the appeals are related to one assessee and having common issues, therefore, they are taken together and decided by a common order. First we take assessee’s appeal for AY 2011-12 in ITA No. 131/DDN/2026.

Brief facts of the case are that the original return of income was filed by the assessee on 30.11.2011 declaring total income of Rs.890,50,35,760/-. The case was selected for scrutiny and draft assessment order was passed u/s 143(3)/144C(1) on 28.03.2016 at an income of Rs.1382,37,41,840/-. The assessee filed objection against the said order before the DRP. In compliance to the directions given by the ld. DRP, the AO vide order dated 23.12.2016, computed the total income at Rs.1382,81,29,790/. Against the said order, assessee preferred an appeal before the Tribunal who in ITA No.1478/Del/2017 vide order dated 18.07.2018 has allowed major relief to the assessee and deleted the additions relating to the corporate issues however, the issues related to the Transfer price adjustments of international transactions with its AE’s of Intra Group Services of Rs. 183,94,39,318/- is remanded back to the file of ld. DRP by making following observation in para 14 & 15 of the order as under: 14. We find, following the above decision the Tribunal vide ITA No.6791/Del/2017 order dated 17.07.2018 has restored the issue to the file of the DRP with a direction to decide the issue afresh by observing as under :- “14. So, following the decision rendered by the coordinate Bench of the Tribunal in taxpayer’s own case for AY 2010-11 (supra), we deem it necessary to remand this issue to ld. DRP to decide afresh to benchmark the international transactions undertaken by the taxpayer by applying the TNMM as MAM by providing an opportunity of being heard to the taxpayer, in the light of the decision rendered by the coordinate Bench of the Tribunal in AY 2010-11. So, grounds no.1 to 9 are determined in favour of the taxpayer for statistical purposes.”

Further, the TP adjustment of interest payment of Rs. 107,78,45,349/-, the coordinate bench of Tribunal vide para 24 of its order has remanded back the matter to the file of AO/TPO to recomputed the adjustment as per the directions given in assessee’s own case for AY 2010-11 in ITA No.1170/Del/2015 & ITA No.1581/Del/2015.

In remand proceedings, the ld. DRP issued fresh directions vide order dt. 31.03.2021 wherein the ld. DRP has not followed the specific direction of the Tribunal of benchmark the transactions by taking TNMM as Most Appropriate Method (MAM) as has been held by the coordinate bench in assessee’s own case for AY 2010-11 and deleted the adjustments made. While confirming the action of the AO/TPO of benchmarking the international transactions of services received from its AE’s, the ld. DRP held the CUP method as MAM, and further observed that the revenue has not accepted the orders of Tribunal for AY 2009-10 & 2010-11 and appeal was filed before the hon’ble high court and therefore, reconfirmed the adjustments of Rs. 183,94,39,318/- made by the AO/TPO towards for the international transactions of intra group services received by the assessee.

With respect to the TP adjustment of interest payment, the TPO in remand proceedings, vide order dt. 29.01.2021 passed u/s 92CA(3) r.w.s. 254 of the Act has reduced the adjustment to Rs. 8,15,25,146/- by taking the rate of 6.07% for the loan of USD 300 Million and 5.78% for the loan of USD 500 Milliion as against 6.18% paid by the assessee.

Against the said order, the assessee filed an appeal before the Ld. CIT(A) who decided the appeals of the assessee in terms of the order passed dated 21.03.2024 for the assessment years 2011-12 and 2012-13 in favour of the assessee. Against the said order, revenue preferred appeals before the Tribunal wherein the Co-ordinate Bench of Dehradun Tribunal in terms of its order in appeal Nos.107 & 105/DDN/2024 for AYs 2011-12 and 2012-13 respectively dated 15.10.2026 has allowed the appeal of the revenue by holding that the assessment orders passed by the AO dated 27.05.2021 were in pursuance to the directions of the DRP in remand proceedings and , therefore, the ld. CIT(A) has no jurisdiction to decide the appeal which is not appealable before him and an opportunity was allowed to the assessee to file fresh appeals before the Tribunal against the final orders passed u/s 143(3)/144C(3)(a)/254 of the Act dt. 27.05.2021 for both the assessment years. Accordingly, the present appeal is filed by the assessee against the final assessment order for Ay 2011-12 dated 27.05.2021 by taking following grounds of appeal: “1. Erred in assessing the taxable income of the Appellant as Rs. 10,78,38,14,800. (Refer ground no. 1) 2. Disallowance of payment made towards intra-group services (i.e., payment of MSU charges, reimbursement of third party expenses, IM recharge and time writing charges, payroll expenses and joint acquisition development of IT Infrastructure and software expenses) to its associated enterprise. (Refer ground no. 2) 3. Without prejudice to the ground that TNMM should be selected as the most appropriate method for benchmarking the transactions pertaining to intra- group services, CUP method is selected and applied in an erroneous manner by considering the amount approved by the Joint Venture ("JV") partner as CUP. (Refer ground no. 3) 4. Disregarded the decision of Hon'ble ITAT and Hon'ble DRP passed for AY 2009-10 and AY 2010-11 even though the facts and circumstances of its case and the business model of the Appellant continued to remain the same. (Refer ground no. 4)

Before us, Ld. AR of the assessee submits that the issue is squarely covered in favour of the assessee in terms of the order of the Co-ordinate Bench in AY 2010-11 wherein the Co-ordinate Bench in ITA No.1518/Del/2015 has deleted the adjustments made of identical nature of international transactions of Intra Group Services by holding that TNMM is most appropriate method for bench marking these transactions as against CUP applied by the AO/TPO. It is further submitted by ld. AR that adjustments of identical nature were also made in AY 2007-08, 2008-09, 2013-14 to 2018-19 which stood deleted by the coordinate bench of Tribunal by following its order for AY 2009-10 and 2010- 11 in assessee’s own case. It is further submitted that the DRP has not followed the order of the Tribunal solely for the reason that an appeal is preferred before the Hon’ble High Court against the orders of Tribunal for AY 2009-10 and 2010-11. The Ld. AR thus submits that the adjustments challenged in the present appeal being identical in nature and there is no change in the circumstances, therefore, as a principal of consistency, same deserves to be deleted.

Heard the rival submissions and perused the materials available on record. It is observed that in AY 2010-11 identical issue was came up for consideration before the Co-ordinate Bench of Tribunal wherein vide para 72 of its order at page 202, the coordinate bench has deleted the adjustments made towards the international transactions of Intra group services received by the assessee from its AE’s, the relevant extract are reproduced as under: “72. On the examination of the voluminous details submitted by the assessee. The Ld. dispute resolution panel has come to the conclusion that assessee has received the services and those services are useful services. With respect to the clubbing of the transaction it was held that when the transactions are closely interrelated it is but natural to club such transaction and benchmarked it together. The Ld. dispute resolution panel at page No. 30-31, has considered the suspect and agreed with the contention of the assessee that intragroup services received from its associated enterprise are closely linked to the main business activity of the assessee company placing reliance on the US regulations, OECD regulations and OECD draft notes on comparability. In view of this we do not find any infirmity and none was pointed out before us by the Ld. departmental representative in the order of the Ld. dispute resolution panel Consequently, after verifying that assessee has demonstrated need for those services, benefit derived from those services, evidence of receipt of such services and submitting that those services are neither duplicative in nature and nor are share holder activities, the DRP directed the Ld. transfer pricing officer services of Rs.3329766244/-, deserves to be upheld. The judicial precedents cited before us also supports the view that the needed test, the benefit test are also required to be viewed from the perspective of a businessperson and not from the perspective of the revenue. Further, no evidences have been led before us by revenue stating that these services are duplicative-in-nature and also serves only the interest of the shareholder. According to the information supplied by the assessee and examined by the Ld. dispute resolution panel does not give any such indication. Further regarding non-sharing of the cost by the joint-venture partners we have given our findings while deciding the appeal of the assessee that such an action of the joint-venture partners cannot be the reason to determine the arm's length price of the services which is been received by the assessee at nil. In view of this we uphold the finding of the Ld. dispute resolution panel holding that transactions

Before us, the Revenue has failed to controvert the findings given by the Tribunal in assessee’s own case for AY 2010-11 and simply reiterated the same arguments as were made earlier. It is also a matter of fact that the DRP has not followed the order of the Tribunal for the sole reason that the Revenue has not accepted the aforesaid order of the Tribunal in AY 2010-11. Considering the overall facts and circumstances and also keeping in view that there was no change in the facts wherein preceding year as well succeeding year similar type of services were received by the assessee and the TP adjustments made were deleted by the Tribunal vide various orders for respective assessment years which are placed before us in the paper book filed. Thus, by respectfully following the view taken by the Tribunal in AY 2010-11, we hereby delete the adjustment made by the AO of Rs. 183,94,39,918/-. Accordingly, grounds of appeal No.2 to 5 are allowed.

Ground of Appeal No.6 of the assesse is with respect holding the refund of Rs.19,37,03,400/- as granted and encashed, however as per the assessee the said refund was never received by it. After considering the facts and carefully heard both the parties, we direct the AO to examine whether the refund of Rs.19,37,03,400/- was ever issued and encashed by the assessee and if not, necessary credit of the tax so paid in excess be allowed against the tax liability computed for the income finally determined after giving effect to the order of Tribunal in present appeal and issue the refund, if any, along with the interest as per law. Accordingly, this ground of appeal of assessee is allowed for statistical purposes.

Ground of appeal No.8 of assessee is with respect to not allowing the credit of TDS Rs. 87,50,178/-. After considering the submissions of both the parties, we direct the AO to verify whether the assessee has declared the corresponding income in the year under appeal and if so the credit of necessary TDS be allowed to the assessee. The ground of appeal is thus allowed for statistical purposes.

Ground of appeal No.9 is regarding not granting interest u/s 244A of the Act which is consequential in nature and thus, the AO is directed to allow the interest on the refund, if any, payable to the assessee after allowing appeal effect to the order of Tribunal in the instant appeal. This ground of appeal accordingly disposed off.

Ground of appeal No.10 is with respect to initiation of penalty proceedings u/s 271(1)(c) which is premature at this stage and thus, dismissed.

Ground of appeal No.11 is general in nature and is not adjudicated.

In the result, the appeal of the assessee for AY 2011-12 is partly allowed in view of the discussion made herein above.

Now coming to the appeal of the assessee for AY 2012-13 in ITA No.132/DDN/2026 for AY 2012-13.

The effective grounds of appeal are Nos. 2 to 5 wherein the assessee has challenged the TP adjustments of Rs. 261,94,86,354/- made towards international transactions of Intra Group Services received by the assessee from its AE’s.

The facts related to this issue are identical to the facts as were existed in AY 2011-12 which fact was fairly admitted by both the parties before us. We have already deleted the adjustment made in AY 2011-12 on this issue while deciding grounds of appeal Nos. 2 to 5 of the assessee which observations are mutatis mutandis followed in the present appeal. This being so, the TP adjustment of Rs. 261,94,86,354/- made by the AP/TPO is hereby deleted. The grounds of appeal Nos. 2 to 5 raised by the assessee are allowed.

Grounds of appeal No.6 to 10 are with respect to the TP adjustments made by the AO determining the ALP interest rate on the external commercial borrowing (“ECB”) by applying CUP method.

Heard both the parties and perused the material available on record. It is observed that in para 5.1.1 of the final assessment order, the AO observed that the DRP has not issued any direction with respect to the adjustment made on the issue on payment of interest on external borrowings. Before us, the claim of the assessee is that though this issue has not been decided by the DRP, however, in AY 2010-11 this issue has been considered and decided in favour of the assessee by the Tribunal in ITA Nos.1170 & 1581/Del/2015. However, from the perusal of the order of the Co-ordinate Bench in ITA No.1170/Del/2015, it is

The Grounds of appeal No.11 is with respect to short allowance of TDS for which the AO is directed to verify whether the assessee has declared the corresponding income related to such short credit of TDS and decide the issue in accordance with law. With this direction, this ground of appeal is allowed for statistical purposes.

The remaining grounds of appeal are consequential in nature and thus needs no adjudication.

In the result, appeal of the assessee for AY 2012-13 is partly allowed.

Briefly stated the facts are that based on the information available on insight portal that there are some legacy issue of disallowances, the case of the assessee was reopened by way of issue of notice u/s 148 on 28.03.2023. In

The assessee filed objections before the Ld. DRP who in terms of the order dated 26.12.2025 has disposed of the objections raised by the assessee and thereafter final assessment order was passed wherein TP adjustments made by TPO were added tot eh total income. The AO further made disallowance of expenses pertaining to Branch Office of Rs.7,92,35,518/- and depreciation of Rs.36,66237/- and site restoration expenses of Rs.21,58,42,106/-. Accordingly, the total income of the assessee stood assessed at Rs. 6,15,90,54,280/-.

Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various grounds as stated in appeal memo.

At the outset, before us, Ld. Counsel for the assessee submits that these issues have already been decided in favour of the assessee by the Co-ordinate Bench of the Tribunal in AY 2010-11 in ITA No.1170/Del/2015 which orders has been followed in preceding assessment years by the coordinate bench of the Tribunal and adjustments / disallowance made were deleted. It is thus prayed that since there was no change in the circumstances, transfer price adjustments made in the year under appeal towards the intra group services received by the assessee be deleted. He prayed accordingly.

On the other hand, Ld. CIT-DR has accepted this factual aspect and submits that the revenue has not accepted the orders of the Tribunal and appeal was field before the Hon’ble High court in AY 2009-10 & AY 2010-11 which are still pending.

After hearing both the parties at length and considering the overall facts, it is observed that the lower authorities have made adjustment/disallowance by observing that the orders of the Co-ordinate Bench in preceding years were not accepted by the Revenue and appeal was preferred before the Hon’ble High Court which is pending as on date. Since, the issues involved in this appeal is identical and squarely covered by the various judgments of the Co-ordinate Bench in assessee’s own case and there is no change in the circumstances thus by respectfully following the orders of the Tribunal in assessee’s own case in

Grounds of appeal No.13 of the assessee is with respect to the disallowance of Site Restoration Expenses of Rs.21,58,42,106/-.

Before us, the Ld. AR submits that the appellant was under contractual obligation to undertake the decommissioning activity and though it had denied the requirement of Site Restoration Expenses for Panna-Mukta Fields and Mid and South-Tapi Fields, thereafter, the matter went to arbitration. The AO observed that the impact of the same is not ascertainable by the assessee and the Site Restoration Expenses were not proved by the assessee. The assessee submits that the expenses related to Site Restoration Expenses has been proved by the Joint Venture partners i.e., BGEPIL, the RIL and ONGC vide a resolution dated 10th April, 2019. The said expenses were incurred wholly and exclusively for the purposes of business and as a part of regular business operations, therefore, the same to be allowed as regular business expenses u/s 37(1) of the Act. The Ld. AR submits that the AO has never doubted the ingredients of the expenditure and merely presumptions have disallowed the same. The Ld. AR further filed detailed written submissions which reads as under: “During the year under consideration, an amount of Rs. 21,58,42,106 was utilised from provision for decommissioning created in earlier years. The said utilisation is for restoration of Mid and South Tapti fields whose decommissioning is on-going during the year. It is submitted that no claim of expenditure / deduction is made at the time of creation of the provision for decommissioning in earlier years and the budget for aforesaid site restoration expenses has been approved by the JV-partners [i.e. BGEPIL (the Appellant), RII. and ONGC] vide a resolution dated 10 April 2019. Since the site restoration expense of Rs. 21,58,42,106 was incurred during the year for the purposes of the Appellant's business operations and was not claimed as a deduction at the time of creation of the decommissioning provision, and is now claimed through utilization of said provision created in

On the other hand, the Ld. CIT-DR vehemently supported the order of the AO and stated that the AO has discussed this issue in detail and such order was

Heard both the parties and perused the materials available on record. The claim of the Revenue that the expenses have not been routed through Profit and Loss account is appears to be incorrect. Looking to the facts that the assessee has debited the provisions of decommissioning which has been charged from the Revenue and the said Site Restoration Expenses incurred during the year were routed through the such provisions made and, therefore, this being a separate accounting treatment, it cannot be held that no expenses was claimed for decommissioning i.e., by debit to provisions for decommissioning on account of Site Restoration expenses.

Coming to the allowability of the same, it is observed that assessee under contractual obligation to restore the worksites in its original shape when it is going to be handed over. It is duty casted upon the assessee to restore the surface land so used to its original conditions as far as possible and in order to fulfill such contractual obligation, assessee had incurred expenses which were quantified and debited under the head Site Restoration Expenses. It is observed that the expenditure of similar nature was claimed in the case of Udaipur Mineral Development Syndicate (P.) Ltd. vs. DCIT reported in [2003] 261 ITR 706 (Rajasthan) wherein after appreciating the nature of expenses and the agreement executed between the State Govt. and lessee (assesse), the Hon’ble Rajasthan High Court held the expenses incurred as allowable expenditure under the provisions of section 37(1) of the Act.

The assesse has made the provisions of site restoration expenses and said expenses are not contingent in nature and therefore, the expenses so incurred are wholly and exclusively for the purpose of business and thus are allowable as business expenditure and, accordingly, we hereby direct the AO to allow the

Grounds of appeal No.14 is on account of levy of interest under section 234A and 134B of the Act for which it is submitted that tax has already been deducted by the payer and, therefore, the provisions of section 209(1) of the Act are not applicable. In this regard, reliance is placed on the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Amadeus It Group Sa in ITA No.257/2023 (Delhi HC). The Co-ordinate Bench of the Tribunal in the case of BG International Ltd. vs. JCIT in ITA No.62/DDN/2019 (Del. Trib.), held that where TDS was deducted by the resident payer, interest could not be charged u/s 234B of the Act.

Considering the aforesaid legal positon settled by the Hon’ble High Court of Delhi, we are of the view that no interest is chargeable from the assessee as TDS has already been deducted by the payer on the consideration for offshore supplies. Accordingly, we hereby direct to deleted the TDS interest levy u/s 234A and 234B of the Act to the extent such TDS covered the totsl tax liablility of the assessee. 46. Grounds of Appeal No. 15 & 16 are consequential in nature, requires no adjudication, thus, are dismissed.

In the result, the appeal of the assessee is partly allowed.

Since we have already decided the appeal of the assesse for AY 2019-20 in ITA No. 133/DDN/2026 herein above, therefore the stay application filed by the assessee become infructuous and thus the same is hereby dismissed.