OIL & NATURAL GAS CORPORATION LIMITEDversusCOMMISSIONER OF INCOME TAX &ANR.

                        [2015] 9 S.C.R. 992


A        OIL & NATURAL GAS CORPORATION LIMITED
                                 v.
            COMMISSIONER OF INCOME TAX &ANR.
                  (Civil Appeal No. 730 of 2007)
B
                          JULY01, 2015
    [RANJAN GOGOi AND PINAKI CHANDRA GHOSE, JJ.]
         Companies (Profits) Surtax Act, 1964-s. 24AA(2)(a)
c and (2)(b) - Exemption Notification No. GSR 307(E) dated
  31.3.1983 issued uls. 24AA - Whether the appellant-
  assessee covered within the purview ofthe Notification- Held:
  s. 24AA grants power to Central Government either to grant
  exemption to both categories of foreign companies
D enumerated in sub-section (2)(a) or (2)(b) or to any one of
  specified category - Exemption Notification has granted
  exemption only to the category of foreign companies
  enumerated in sub-section (2)(a) and has specifically omitted
  the category enumerated ins. (2)(b)- Thus, when the Central      '
                                                                   I
E Government has consciously chosen to grant exemption to
  one category, the scope of the grant cannot be enhanced or
  expanded - The appellants-assesses not entitled to the
  exemption under the Notification, as they fall in the category
  enumerated in sub-section (2)(b) of s. 24AA.
F
         Dismissing the appeals, the Court

         HELD: 1. The power to grant exemption u/s. 24-
  AA of the Companies (Profits) Surtax Act, 1964, is two-
G 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
H Central Government from granting exemptions to both
                             992
    OIL & NATURAL GAS CORPORATION LIMITED v.             993
           COMMISSIONER OF INCOME TAX

categories of foreign companies mentioned above or to A
confine the grant of exemption to any one or a specified
category offoreign companies. [Para 12] [1004-H; 1005•
A-B]

       2. On reading the Notification No.GSR 307(E) s
dated 31.3.1983, it clearly appears that the exemption has
been granted only to foreign companies with whom the ·
Central Government had executed agreements for direct
association or participation by the Central Government
or the persons authorized by the appellant in the · C
prospecting or extraction or production of mineral oils.
Thus, 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 24-AA of the Surtax Act. The D
second category of foreign companies that may be
providing services as enumerated in sub-section 2(b) of
Section 24-AA is specifically omitted in the exemption
notification. The power under Section 24-AA of the Surtax
Act, is wide enough to include even this category of E
foreign companies. The omission of this particular
category of foreign companies in the exemption
notification, notwithstanding the wide amplitude and
availability of the power under Section 24-AA, clearly F
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 24-AAofthe Surtax Act. [Para 12] [1005-C-G]        G

      3. The explanatory notes on the provisions of
Finance Act, 1981 [Paragraph 11(4) and 26(1)] clearly
goes to show that the legislative intent behind inclusion
of Section 24-AA is to encourage foreign companies to H
enter into participating contracts with the Union
994        SUPREME COURT REPORTS               [2015) 9 S.C.R.


A Government in the business of oil exploration or
  production. The further legislative intent was to seek
  greater participation of foreign companies in the matter
  of providing services including supply of ships, aircrafts,
  machinery or plant in connection with business of
B extraction or p.roduction of mineral oils. The aforesaid
  l~gislative intent which is two-fold is manifested by the
  two limbs of sub-section 2 of Section 24AA of the Surtax
  Act to which the power of exemption was intended to
  operate i.e. sub-section 2(a) and 2(b) of Section 24AA. If
C out of the two limbs where the power of exemption was
  intended to operate, the repository of the power i.e.
  Central Government, had consciously chosen to grant
  exemption in one particular field i.e. foreign companies
  covered by sub-section 2(a) of Section 24-AA, the scope
0
  of the grant cannot be enhanced or expanded. by a
  judicial pronouncement. [Para 13] [1005-H; 1006-A-E]
           Commissioner of Income Tax-Ill Vs. Calcutta
           Knitwears, Ludhiana (2014) 6 SCC 444;
E          Commissioner of Central Excise, New Delhi Vs.
           Hari Chand Shri Gopal and Ors. (2011) 1 SCC
           236: 2010 (13) SCR 820 - relied on.
                       Case Law Reference
F (2014) 6 sec 444              relied on.          Para 11
  2010 (13) SCR 820             relied on.          Para 11
            CIVILAPPELLATE JURISDICTION : Civil Appeal No.
      730 of2007
G           From the Judgment and Order dated 15.12.2005 in ITA
      No. 443/2001 of The High CourtofUttaranchal at Nainital.
                               WITH
      Civil Appeal Nos. 728, 732, 734, 735, 739,742, 4140,
H 4785,4787,4790,6009,6010,6014,6015,6017,6018,6019,
  6022 of2007
      OIL & NATURAL GAS CORPORATION LIMITED v.                      995
             COMMISSIONER OF INCOME TAX

    Civil Appeal Nos. 2009,-4315, 4316, 4318, 4319, 4320,           A
4322 OF 2008

    Arvind P. Datar, Sangeeta Bharti, Krishanu Adhikary,
Subramonium Prasad and S.R. Setia for the Appellant.
                                                                    B
    Guru Krishna Kumar, Avijit Prasad, Sneha Iyer, Gargi
Khanna, Anil Katiyar and B.V. Balaram Das for the
Respondents.

     The Judgment of the Couit was delivered by
                                                                    c
       RANJAN GOGOi, J. 1. A short and precise question
which is common to all the appeals under consideration has
arisen in the present group of appeals instituted by the Oil and
Natural Gas Corporation (ONGC) which has been assessed
as a representative assessee within the meaning of Section D
160-A of Income Tax Act, 196.1. The assessments in question
have been made under the provisions of the Companies·
(Profits) SurtaxAct, 1964 (hereinafter referred to as the 'Surtax
Act').
                                                                    E
     2. The question posing for an answer revolves around
the true and correct purport and effect of exemption notification
bearing No.GSR 307(E) dated 31.03.1983 issued under
Section 24AAofthe Surtax Act. Fora quick understanding of
the question that arise for consideration, the provisions of        F
Section 24-AA of the Surtax Act and the contents of the
notification bearing No.GSR 307(E) may be extracted below:
     "24AA. Power to make exemption, etc., in
     relation to participation in the business of                   G
     prospecting for, extraction; etc., of mineral oils.
     (1) If the Central Government is satisfied that
     it is necessary or expedient so to do in the
     public interest, it may, by notification in the
     official Gazette, make in exemption, reduction                 H
996   SUPREME COURT REPORTS                [2015].9 S.C.R.


A     in rate or other modification in respect ofsurtax
      in favour of any class of foreign companies
      specified in sub-section (2) or in regard to the
      whole or any part of the profits chargeable of
      such class of companies.
 B    Explanation.-For the purpo~es, of this sub-
      section, "foreign company" shall have the
      meaning assigned to it in clause (4) of section
      BOB of the Income-tax Act.
c     (2) The foreign companies referred to in sub-
      section (1) are the following, namely:-
      (a) foreign companies with whom the Central
      Government has entered into agreements for
      the association or participation of that
D     Government or any person authorized by that
      Government in any business consisting of the
      prospecting for or extraction or production of.
      mineral oils; and
      (b) foreign companies providing any services
E
      or facilities or supplying any ship, aircraft,
      machinery or plant (whether by way of sale or
      hire) in connection with any business
      consisting of the prospecting for or extraction
F     or production of mineral oils carried on by that
      Government or any person specified by that
      Government in this behalfby notification in the
      official Gazette.
      (3) Every notification issued under this section
G     shall be laid before each House of Parliament.
      Explanation.-Forthe purposes of this section,
      "mineral oil" includes petroleum and natural
      gas."
      "GSR No. 307(E) - Exemption from surtax of
H
    OIL & NATURAL GAS CORPORATION LIMITED v.    997
  COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.]
     foreign· companies with whom Central                      A
     Government has ente ...
     Exemption from surtax of foreign companies
     with whom Central Government has entered
     into agreements for participation in business
     of prospecting for or extraction of mineral oils          B
     -Notification issued under sub-section (1)
     Whereas the Central Government is satisfied
     that it is necessary and expedient in the public
     interest to make an exemption in respect of               c
     surtax in favour of foreign companies with
     whom the Central Government has entered
     into agreements for the association or
     participation of that Government or any person
     authorised by that Government in any                      D
     business consisting of the prospecting for or
     extraction or production of mineral oils;
     Now, therefore, in exercise of the powers
     conferred by section 24AA of the Companies
     (Profits) Surtax Act, 1964 (7 of 1964), the               E
     Central Government hereby provides that no
     surtax shall be payable by such foreign
     companies.
     Explanation : For the purposes of this                    F
     notification :
      (a) "foreign company" shall have the meaning
     assigned to it in clause (4) of section 808 of
     the Income-tax Act, 1961 (43of1961);
       (b) "mineral oil" includes petroleum and                G
     natural gas.
     Notification: GSR No. 307(E), dated 31-3-1983."
     3. Section 24-AA of the Surtax Act, as it would appear,
vests in the Central Government the power to make exemption,   H
998       SUPREME COURT REPORTS                    [2015] 9 S.C.R.


A reduction in rate or other modification in respect of Surtax in
  favour of any class of foreign companies which are specified
  in sub-section (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 24-AA refers to two categories of foreign
B companies. The first is foreign companies with whom the
  Central Government has entered into agreements for
  association or participation, including participation by any
  authorized person, in any business consisting of the
  prospecting or extraction or production of mineral oils. The
C second category of foreign companies mentioned in sub-
  section (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
0
  Government or any authorised person. Specifically the Section
  states that mineral oils will include petroleum and natural gas.

       4. The exemption notification bearing No.GSR 307(E)
  dated 31.3.1983, as it has been noticed, specifically grants
E 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 authorized person in the business of prospecting or
F extraction or production of mineral oils.

         5. In the present appeals, 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
G prospecting or extraction or production of mineral oils. Such
  agreements do not contemplate a direct association or
  participation of the ONGC (a person authorized by the Central
  Government by notification dated 2.8.1989) in the prospecting
H or extraction or production of mineral oils but involved the taking
   OIL & NATURAL GAS CORPORATION LIMITED v.                         999
 COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.]

of services and facilities or use of plant or machinery which is A
connected with the business of prospecting or extraction or
production of mineral oils.

      6. In the above situation, the primary authority took the
view that the agreements executed by the ONGC with the B
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 C
companies with whom there were agreements for participation
by the Central Government or the person authorized 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 D
covered by sub-section 2(b) of Section 24-AA of the Surtax
Act and were accordingly beyond the purview of the exemption
notification.

       7. The said view was reversed by the learned Appellate       E
Commissioner and upheld by the Learned Income Tax
Appellate Tribunal. In the appeal under Section 260A of the
Act, the High Court of Uttarakhand in the lead case (CA No. 730
of 2007) overturned the view taken by the Appellate
Commissioner and the learned Tribunal leading to the                F
institution of the present appeal by the aggrieved representative
assessee i.e. the ONGC.

    8. We have heard Shri Arvind P. Datar, learned senior
counsel appearing for the appellant and Shri Guru Krishna G
Kumar, learned seni<!lr counsel for the Revenue.

     9. The respective arguments though have been elaborate
the point urged is brief. Shri Datar would contend that as the
exemption notification contains/uses.the same language as           H
1000       SUPREME COURT REPORTS                   [2015) 9 S.C.R.


 A found in sub-section 2(a) of Section 24-AA of the Surtax Act
   its applicability should be understood with reference to the
   existence of agreement with the foreign companies rather than
   the immediate purpose of such agreement, namely, involvement
   of the Central Government or the authorized person in the
 B business of prospecting or extraction or production of mineral
   oils. It is further argued by the learned senior counsel that
   regardless of the fact whether the agreement brings about
   association or participation of the Central Government or the
   authorized person in such business of prospecting or
 C extraction or production of mineral oils or such agreement
   results in rendering of service, so long as the rendering of such
   service is directly associated with the business of prospecting
   or extraction or production or mineral oils, Sub-section 2(a) of
   Section 24-AAofthe SurtaxAct must be understood to include
 0
   even such foreign companies with whom the ONGC had
   executed agreements to provide such oervices or to make
   available plant or machinery. The exemption notification dated
   31.3.1983 must be understood in the above light, it is argued.
 E If that be so, according to Shri Datar, sub-section 2{b) of
   Section 24-AA would only include foreign companies with
   whom the ONGC has no direct agreement though such foreign
   companies may nevertheless be providing similar services,
   may be, on the strength of separate agreements with the foreign
 F campanies with whom the ONGC has executed an agreement
   as contemplated in Sub-section 2{a) of Section 24-AA of the
   Surtax Act.

         10. Shri Guru Krishna Kumar, learned senior counsel
 G appearing for the. Revenue, has countered the arguments
   advanced on behalf of the appellants by contending that the
   relevant provisions of the Surtax Act i.e. Section 24-AA and
   the exemption notification must be construed by its plain and
   unambiguous language which indicate two separate situations
 H in respect of which power to grant exemption is conferred by
   OIL &NATURAL GAS CORPORATION LlMITED v.     1001
 COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.]
section 24-AA. It is contended that though the Central A
Government has also been empowered to grant exemptions
in respect of the situations covered by sub-section 2(b), namely,
where only services are provided, yet, the Central Government.
while issuing the exemption notification dated 31.3.1983 had
clearly chosen to grant exemption in respect of situation B
covered by sub-section 2(a) of Section 24-AA, alone, namely,
in respect of agreements with foreign companies resulting in
direct association or participation of the Central Government
or the authorized person in the business of prospecting or
extraction or production of mineral oils. Situations where the C
foreign Company is providing services or making available.
plant or machinery though may be connected in the business
of prospecting, extraction or production of mineral oils are
clearly excluded from the purview of exemption by the
                                                                  0
notification in question, it is contended.

      11. It will not be necessary to traverse the long line of
decisions of this Court dealing with the fundamental principles
of interpretation of a taxing statute or an exemption notification.
The core of aforesaid principles have been reiterated in a E
recent decision of this Court in Commissioner of Income
Tax-II/ Vs .. Calcutta Knitwears, Ludhiana 1• It is the
aforesaid principles, extracted below, that will have to be
applied to the present case and the correct meaning and F
purport of the exemption notification has to be determined on
the said basis.

     20. Section 158-BD of the Act provides for
     "undisclosed income" of any other person. Before
     we proceed to explain the said provision, we intend         G
     to remind ourselves of the first or the basic
     principles of interpretation of a fiscal legislation. It
     is time and again reiterated that the courts, while
1 (2014) s sec 444                                               H
1002   SUPREME COURT REPORTS                      [2015] 9 S.C.R.


 A     interpreting the provisions of a fiscal legislation
       should neither add nor subtract a word from the
       provisions of instant meaning of the sections. It
       may be mentioned that the foremost principle of
       interpretation of fiscal statutes in every system of
 B     interpretation is the rule of strict interpretation
       which provides that where the words of the statute
       are absolutely clear and unambiguous, recourse
       cannot be had to the principles of interpretation
       other than the literal rule. (Swedish Match AB v.
 c     SEBI and CIT v. Ajax Products Ltd.)

       30. In B. Premanand v. Mohan Koikal this Court
       has observed as follows: (SCC p. 273, para 24)

 D     "24. The literal rule of interpretation really means
       that there should be no interpretation. In other
       words, we should read the statute as it is, without
       distorting or twisting its language. We may mention
       here that the literal rule of interpretation is not only
 E     followed by Judges and lawyers, but it is also
       followed by the layman in his ordinary life. To give
       an illustration, if a person says 'this is a pencil',
       then he means that it is a pencil; and it is not that
       when he says that the object is a pencil, he means
 F     that it is a horse, donkey or an elephant. In other
       words, the literal rule of interpretation simply
       means that we mean what we say and we say what
       we mean. If we do not follow the literal rule of
       interpretation, social life will become impossible,
 G     and we will not understand each other. If we say
       that a certain object is a book, then we mean it is
       a book. If we say it is a book, but we mean it is a
       horse, table or an elephant, then we will not be
       able to communicate with each other. Life will
 H
   OIL & NATURAL GAS CORPORATION LIMITED v.    1003
                                                    •
 COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.]

     become impossible. Hence, the meaning of the             A
     literal rule of interpretation is simply that we mean
     what we say and we say what we mean."

      31. Thus, the language of a taxing statute should
      ordinarily be read and understood in the sense in       B
      which it is harmonious with the object of the statute
      to effectuate the legislative animation. A taxing
      statute should be strictly construed; common
      sense approach, equity, logic, ethics and morality
      have no role to play. Nothing is to be read in,         c
      nothing is to be implied; one can only look fairly
      at the language used and nothing more and
      nothing less. (J. Srinivasa Rao v. State ofA.P. and
    . Jagdambika Pratap Narain Singh v. CBDT.)
                                                              D
     Specifically, insofar as an exemption notification is
concerned the view expressed in Commissioner of Central
Excise, New Delhi Vs. Hari Chand Shri Gopal and Others2
would require notice.
                                                              E
     29. The law is well settled that a person who claims
     exemption or concession has to establish that he
     is entitled to that exemption or concession. A
     provision providing for an exemption, concession
     or exception, as the case may be, has to be              F
     construed strictly with certain exceptions
     depending upon the settings on which the
     provision has been placed in the statute and the
     object and purpose to be achieved. If exemption
     is available on complying with certain conditions,       G
     the conditions have to be complied with. The
     mandatory requirements of those conditions must
     be obeyed or fulfilled exactly, though at times,
     some latitude can be shown, ifthere is a failure to
                                                              H
 2 c2011i 1sec235
1004       SUPREME COURT REPORTS                    [2015] 9 S.C.R.


 A        comply with some requirements which are
          directory in nature, the non-compliance of which
          would not affect the essence or substance of the
          notification granting exemption.

 s        30. In Novopan India Ltd. this Court held that a
          person, invoking an exception or exemption
          provisions, to relieve him of tax liability must
          establish clearly that he is covered by the said
          provisions and, in case of doubt or ambiguity, the
 C        benefit of it must go to the State. A Constitution
          Bench of this Court in Hansraj Gordhandas v. CCE
          and Customs held that (Novopan India Ltd. case~,
          sec   p. 614, para 16)

 o              "16. .. . such a notification has to be
          interpreted in the light of the words employed by it
          and not on any other basis. This was so held in
          the context of the principle that in a taxing statute,
          there is no room for any intendment, that regard
 E        must be had to the clear meaning of the words
          and that the matter should be governed wholly by
          the language of the notification i.e. by the plain
          terms of the exemption."

 F         12. Section 24-AA of the Surtax Act vests power in
   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
 G 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 authorized
   person is associated. In other words, the power to grant
 H exemption is two-fold and covers agreements directly
     OIL & NATURAL GAS CORPORATION LIMITED v.    1005
   COMMISSIONER OF INCOME TAX [RANJAN GOGOi, J.]

   associated with the prospecting or extraction or production of A
   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 B
  confine the grant of exemption to any one or a specified
  category of foreign companies. Reading the notification
  No.GSR 307(E) dated 31.3.1983 it clearly appears that the
  exemption has been granted only to foreign companies with
  whom the Central Government had executed agreements for C
  direct association or participation by the Central Government
  or the persons authorized 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
                                                                  0
  exemption to only one category of foreign companies which
  has been specifically enumerated in sub-section 2(a) of
  Section 24-AA of the Surtax Act. The second category of
  foreign companies that may be providing services as
  enumerated in sub-section 2(b) of Section 24-AA is specifically E
  omitted in the exemption notification. The power under Section~
  24-AAofthe Surtax Act, as already noticed, 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 F
  availability of the power under Section 24-AA, 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 24-AAofthe SurtaxAct.               G

     13. Section 24-AAofthe SurtaxActwas brought into the
statute book by Act 16 of 1981 i.e. Finance Act, 1981 with
effect from 1.4.1981. The explanatory notes on the provisions
of Finance Act [Paragraph 11(4) and 26(1)] clearly goes to       H
1006          SUPREME COURT REPORTS                 [2015] 9 S.C.R.


 A show that the legislative intent behind inclusion of Section 24-
   AA is to encourage foreign companies to enter into
   participating contracts with the Union Government in the
   business of oil exploration or production. The further legislative
   intent was to seek greater participation of foreign companies
 B in the matter of providing services including supply of ships,
   aircrafts, machinery or plant in connection with business of
   extraction or production of mineral. oils. The aforesaid
   legislative intent which is two-fold is manifested by the two limbs
   of sub-section 2 of Section 24AA of the Surtax Act to which
 C the power of exemption was intended to operate i.e. sub-
   section 2(a) and 2(b) of Section 24AA. If out of the two limbs
   where the power of exemption was intended to c:ipe·rate, the
   repository of the power i.e. Central Government, had
   consciously chosen to grant exemption in one particular field
 0
   i.e. foreign companies covered by sub-section 2(a) of Section
   24-AA, the scope of the grant cannot be enhanced or expanded
   by a judicial pronouncement which is what the arguments made
   on behalf of the appellants intend to achieve. Any such
 E interpretation must, therefore, be avoided. Consequently, we
   see no reason to depart from the basic principles of
   interpretation, as already noticed,~lhat should .. govern the
   present issue. We, accordingly, do not find any merit in any of
   the appeals under consideration. The same are, therefore,
 F dismissed, however, withoutanyorderastocosts. The orders
   of the High Court, under challenge in the appeals are affirmed.

       Kalpana K. Tripathy                           Appeals dismissed.