Law:

Section:

ORDER Sanjiv Khanna, J. - Petitioner is a company with limited liability. Petitioner responded to the tenders floated by Oil and Natural Gas Commission (ONGC) and on acceptance, was awarded contracts for deployment of work over rigs and other auxiliary operation services in the oil fields in the western region. Three identical contracts were executed by the petitioner with ONGC under the heading "Charter Hiring of one work over rig". 2. The petitioner with prior approval of Government of India entered into a loan agreement with State Bank of India, Singapore to avail of a foreign currency loan of 9,00,000/- USD and Rupee loan of Rs.1,92,00,000/-. The loan was taken to finance the purchase of three work over rigs for drilling activities in relation of the said contract. 3. As per paragraph 10.3 of the loan agreement dated 21st July, 1994 with State Bank of India, Singapore, the petitioner was liable to pay principal, interest and other sums as required in full without deduction of tax, fee, duty premiums and any other charge whatsoever imposed by revenue authorities and in the event, the petitioner was compelled to make any such payment or deduction, the petitioner as the borrower was required to bear and pay the additional sum as necessary to ensure that the bank received payment in full in respect of the principal, interest or otherwise. 4. By letter dated 25th July, 1994, the petitioner applied for exemption under Section 10(15)(iv)(c) of the Income Tax Act, 1961 (Act, for short) with the Central Board of Direct Taxes (CBDT). The CBDT by their letter dated 3rd August, 1994 asked the petitioner to clarify whether it was an "industrial undertaking" under the Act, to which the petitioner responded vide letter dated 11th August, 1994. 5. By letter dated 9th September, 1994, the petitioner was directed to show cause why their application should be approved as the petitioner was engaged in giving on hire the equipments but was not engaged in manufacturing or processing activities. The application was rejected by letter dated 17th October, 1994 on the ground that the petitioner was not an industrial undertaking which only means an undertaking engaged in…

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