JUDGMENT

Akil Kureshi, J. - This is appeal filed by the revenue to challenge the judgment of Income Tax Appellate Tribunal. Following questions are presented for our consideration;

"1. Whether in law and on the facts of the instant case, was the Tribunal justified in holding that the Company was eligible for deduction under section 42(1)(a) ignoring the fact that the Company had not surrendered its block; rather it had sought for an extension of time to full fill its contract. Nesarikar

2. Whether in law and on the facts of the instant case, was the Tribunal in error in its interpretation of Section 42(1)(a); that deals with the surrender of an area of exploration and not the relinquishment of the contract as concluded by the Tribunal."

2. Brief facts are as under;

Respondent Assesses Hindustan Oil Exploration Company Ltd. is engaged in the business of exploration and extraction of oil. The issue pertains to the assesses return of income for the year 2008-2009. The return filed by the assesses for the said assessment year declared NIL income. In the return, the assesses had claimed a deduction of a sum of Rs. 99.96 Crores under section 42 of the Income Tax Act, 1961 (for short ''the Act'').

3. The assesses company had entered into a Production Sharing Contract (PSC) with Government of India on 08/10/2001 for the purposes of oil exploration. As per the PSC, a consortium of three companies of which the assesses was a part, was issued a license for carrying out exploration of oil in the Kaveri Basin by the Government of India. The initial period of contract was for three years. Entire oil exploration had to be completed in seven years in three phases. At the end of the said period, the company had asked for extension, which was denied by the Government of India. The deduction of Rs. 99.96 crores was claimed by the company which was an expenditure in oil exploration on the ground that the block was surrendered on 15/03/2008. Reliance in this respect was made to section 42(1) (a) of the Act.

4. The Assessing Officer was of the opinion that this was not a case of surrender of right to carry on oil exploration since the assesses was interested in extension of time, which was denied by the Government of India. The issue eventually reached the tribunal. Tribunal by the impugned judgment rejected the revenue''s appeal and held that looking to the specific purpose for which the section 42 of the Act was enacted, the purposive interpretation thereof was necessary and resultantly the present case would be covered by the deduction provision contained in section 42 of the Act. The tribunal held and observed as under;

"We have heard the rival submissions and perused the material before us. We find that to encourage the oil exploration Government of India introduced a new policy and simultaneously made amendment in the Act, that the assesses had made an application in pursuance of PSC and was allotted area for exploration w.e.f. 16.03.2001, that it was allowed to explore the area for seven years in three phases, that it had informed the BSE that it could not oil in two of the wells, that in the year 2006 Government notified that extension could be granted to the earlier allottee''s, that vide its application, dated 16.1.2008, the assesses requested for an extension, that the DGHC rejected the application filed by it for extending the exploration period that the AO held that there was no voluntary surrender of the oil fields, that the assesses could not claim deduction under section 42(1) of the Act. In our opinion, purposive interpretation of the provisions of the Act will be useful to decide the issue. Section 42 of the Act was brought on statute with a very specific purposeto encourage oil exploration. Purpose to introduce it was to tide over the ever increasing import bill of petroleum products. PSC is the testimony of the efforts and intention of the government to deal with the oil crisis. To encourage the oil exploration area incentive in