M/S.VEDANTA LIMITED vs THE ASSISTANT DIRECTOR OF

T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Judgment Reserved on: 17.04.2026
Judgment Delivered on: 02.06.2026
Coram:
THE HONOURABLE Dr.JUSTICE G.JAYACHANDRAN
and
THE HONOURABLE MR.JUSTICE R.SAKTHIVEL
T.C.A.Nos.96 and 97 of 2013 & 456 and 457 of 2013
T.C.A.No 96 . of 2013
M/s.Vedanta Limited,
(Successor in Interest to Cairn India Limited)
ASF Center, Tower B, 362-363,
Jwala Mill Road, Phase IV, Udyog Vihar,
Gurugram, Haryana-122 016. … Appellant
Cause title amended vide court order dated 13.03.2026 made in CMP.No.1066/2025 in TCA.No.96/2013
(GJJ and SSAJ)
vs.
The Assistant Director of Income Tax,
(International Taxation),
121, Nungambakkam High Road,
Chennai - 600 034. … Respondent
Prayer: Tax Case (Appeal) filed under Section 260-A of the Income Tax Act, 1961,
against the order of the Income Tax Appellate Tribunal, Chennai ‘C’ Bench dated
22.08.2012 in ITA.No.207/Mds/2012 Assessment Year 2002–2003.
T.C.A.No 97 . of 2013
M/s.Vedanta Limited,
(Successor in Interest to Cairn India Limited)
ASF Center, Tower B, 362-363,
Jwala Mill Road, Phase IV, Udyog Vihar,
Gurugram, Haryana-122 016. … Appellant
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
Cause title amended vide court order dated 13.03.2026 made in CMP.No.992/2025 in TCA.No.97/2013 (GJJ
and SSAJ)
vs.
The Assistant Director of Income Tax,
(International Taxation),
121, Nungambakkam High Road,
Chennai - 600 034. … Respondent
Prayer: Tax Case (Appeal) filed under Section 260-A of the Income Tax Act, 1961,
against the order of the Income Tax Appellate Tribunal, Chennai ‘C’ Bench dated
22.08.2012 in ITA.No.208/Mds/2012 Assessment Year 2004–2005.
For Appellant : Mr.Srinath Sridevan, Senior Advocate,
in all cases for M/s.M.V.Swaroop, Gayathri, B.Devadharshini,
Hredai, Thivakkaran Rajagopalan, Sankar
For Respondent : Mr.B.Ramana Kumar, Senior Standing Counsel (IT)
in all cases & Mr.Avinash Krishnan Ravi,
Junior Standing Counsel
T.C.A.No 456 . of 2013
Commissioner of Income Tax,
Chennai. … Appellant
vs.
M/s.Vedanta Limited,
(Successor in Interest to Cairn India Limited)
ASF Center, Tower B, 362-363,
Jwala Mill Road, Phase IV, Udyog Vihar,
Gurugram, Haryana-122 016.
Cause title amended vide court order dated 13.03.2026 made in CMP.No.989/2025 in TCA.No.456/2013
(GJJ and SSAJ)
Prayer: Tax Case (Appeal) filed under Section 260-A of the Income Tax Act, 1961,
against the order of the Income Tax Appellate Tribunal, Madras ‘C’ Bench, dated
22.08.2012 in ITA.No.327/Mds/2012.
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
T.C.A.No 457 . of 2013
Commissioner of Income Tax,
Chennai. … Appellant
vs.
M/s.Vedanta Limited,
(Successor in Interest to Cairn India Limited)
ASF Center, Tower B, 362-363,
Jwala Mill Road, Phase IV, Udyog Vihar,
Gurugram, Haryana-122 016.
Cause title amended vide court order dated 13.03.2026 made in CMP.No.991/2025 in TCA.No.457/2013
(GJJ and SSAJ)
Prayer: Tax Case (Appeal) filed under Section 260-A of the Income Tax Act, 1961,
against the order of the Income Tax Appellate Tribunal, Madras ‘C’ Bench, dated
22.08.2012 in ITA.No.328/Mds/2012.
For Appellant : Mr.B.Ramana Kumar, Senior Standing Counsel (IT)
in all cases & Mr.Avinash Krishnan Ravi,
Junior Standing Counsel
For Respondent : Mr.Srinath Sridevan, Senior Advocate,
in all cases for M/s.M.V.Swaroop, Gayathri, B.Devadharshini,
Hredai, Thivakkaran Rajagopalan, Sankar
COMMON JUDGMENT
Dr.G.JAYACHANDRAN, J
The Appeals and cross appeals are filed by the assessee and the revenue
being aggrieved by the orders of the Income Tax Appellate Tribunal, Chennai in the
batch of appeals in respect of the assessee returns filed for the AY 2002-2003 and
2004-2005.
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
(i) T.C.A.No.96 of 2013 under Section 260-A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal, Chennai Bench “C”, dated
22.08.2012 in I.T.A.No.207/Mds/2012 for the AY 2002-2003 and T.C.A.No.97 of 2013
under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax
Appellate Tribunal, Chennai Bench-”C”, dated 22.08.2012 in I.T.A.No.208/Mds/2012 for
the AY 2004-05, are the appeals by the assessee.
(ii) T.C.A.No.456 of 2013 under Section 260-A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal, Madras “C” Bench, dated
22.08.2012 in I.T.A.No.327/Mds/2012 for the AY 2002-2003 and the T.C.A.No.457 of
2013 filed under Section 260-A of the Income Tax Act, 1961 against the order of the
Income Tax Appellate Tribunal, Madras “C” Bench, dated 22.08.2012 in
I.T.A.No.328/Mds/2012 for the year 2004-2005, are by the Revenue.
2. The cross appeals by the assessee and the Revenue in respect of the
assessment years 2002-03 and 2004-05 were disposed by the Income Tax Appellate
Tribunal (ITAT) vide common order dated 22/08/2012. It partly allowed the appeals
filed by the Revenue through common order. Being aggrieved, the assessee in T.C.
(A).No.96 of 2010 and T.C.(A).No.97 of 2010 and the revenue in T.C.(A).No.456 of
2010 and T.C.(A).No.457 of 2010 are before us by way of respective appeals.
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
3. The company “Cairn Energy India Pvt. Limited (CEIL)” is a non-
resident Company incorporated in New South Wales, Australia and engaged in
prospecting and production of mineral oil and in some cases, gas also, in India its
Project Office located at Chennai. The said Company is wholly owned subsidiary of
Cairn Energy Asia Limited (CEAL), which is a company incorporated and registered
in Australia.
4. The Assessing Officer disallowed the assessee's claim in respect of
provision for the site restoration amount to a tune of Rs.6,84,14,348/- for the
Assessment Year 2002-03 and Rs.6,82,24,247/- for the Assessment Year 2004-05.
This is the subject matter in these batch of appeals.
5. The ITAT, following its order passed in the case of the same assessee,
the cross-appeals by the assessee-company and the Revenue, were disposed of by the
Income Tax Appellate Tribunal, in “C” Bench, Chennai, by common order, dated
22.08.2012. Being aggrieved, the assessee-Company has filed T.C.A.Nos.96 and 97
of 2013 in respect of the respective assessment year 2002-2003 and 2004-2005. The
Revenue has filed appeals in T.C.A.No.456 of 2013 for the assessment year 2002-
2003 and T.C.A.No.457 of 2013 for the assessment year 2004-2005.
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
6. Considering the grounds of appeals, the appeals were admitted framing
the following substantial questions of law:-
(i) T.C.A.Nos.96 and 97 of 2013 were admitted on 22.02.2013 on the
following substantial questions of law:
(i) Whether on the facts and circumstances of the
case of the Appellant that the amount of Rs.6,82,24,247/-
debited in the profit and loss account towards provision for site
restoration cost was not an allowable deduction under the Act ?
(ii) Whether on the facts and circumstances and
correct interpretation of provisions contained in Section 37(1)
of the Act read with Section 42 of the Act, the sum of
Rs.6,82,24,247/- representing provision for site restoration cost
is an eligible business deduction, while computing the income of
the appellant Company?
(iii) Whether on the facts and circumstances of the
case of the appellant, the Tribunal has correctly disposed of the
instant appeal, particularly when it has not given any reasons
for disallowing the deduction for site restoration costs under
normal computation?
(iv) Whether on the facts and circumstances of the
case, could it not be held that the deduction claimed as
aforesaid represented an ascertained liability and allowable
deduction on the basis of principles laid down by the Apex
Court in the case of Calcutta Co. Ltd. Vs. CIT, reported in 37
ITR 1 and Bharath Earth Movers Ltd. Vs. CIT, reported in 245
ITR 428 ?
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
(ii) T.C.A.Nos.456 and 457 of 2013 were admitted by this Court on
30.10.2013 on the following substantial questions of law:
(i) Whether under the facts and circumstances of
the case, the Income Tax Appellate Tribunal was right in
holding that the provision for site restoration expenses
could not be added back by way of adjustment treating it as
an un-ascertained liability in computation of book profits
under Section 115-JB, even though the dis-allowance of the
claim under normal computation has been upheld ?
(ii) Whether under the facts and circumstances of
the case, the Income Tax Appellate Tribunal was right in
holding that the provision for site restoration expenses
debited by the assessee to its profit and loss account is not
an un-ascertained liability?
7. The common order of the Income Tax Appellate Tribunal, dated
22.08.2012, impugned in this batch of appeals, stems out of the following facts:
The assessee was engaged in exploration of petroleum, pursuant to the joint
venture agreement, dated 28.10.1994, entered into between the consortium of private
companies, with Government of India and ONGC, and while filing the Return of their
income for the assessment year 2002-2003, the assessee-Company claimed deduction
in respect of the provision for “site restoration” to the tune of Rs.6,84,14,348/- and
for the assessment year 2004-2005 under the same head being the sum of
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
Rs.6,82,24,247/-. The said amount was debited under the head “operating expenses”
in the Profit and Loss Account. The provision made for site restoration is to be
incurred in future, for restoration of the site, after completion of extracting the natural
resources.
8. The claim of the assessee-Company is that its site restoration
expenditure is ascertainable and they are entitled to claim deduction, in view of the
judgment of the Honourable Supreme Court in the case of “Bharat Earth Movers
Vs. Commissioner of Income Tax, Karnataka”, reported in 2000 (245) ITR 428
(SC) .
9. Their claim was declined by the assessing officer by observing that the
assessee has not incurred any expenditure towards site restoration during the period
relevant under the assessment. It is only the provision made for future liability, which
is not ascertainable.

10. On appeal by the assessee, the Tribunal, following its earlier
consolidated order, dated 04.06.2010 in respect of the previous assessment years of
the same assessee, dismissed the appeal of the assessee, holding that the pendency of
the further appeal, i.e., in T.C.A.No.1299 to 1301 of 2010 filed by the assessees
before the High Court, is not an impediment to dispose of the appeals against the
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
assessee-Company.
11. It is pertinent to note that this Court, considering the assessee’s appeal
preferred against the earlier order of the Tribunal, referred and relied in the order
impugned in the present appeals allowed those appeal in favour of the assessee.
(T.C.A.Nos.1299 to 1301 of 2010 order even dated 04.06.2010). Therefore, the
present appeals filed by the assessee, which are the subject matter of T.C.A.Nos.96
and 97 of 2013, for the subsequent years 2002-2003 and 2004-2005, has to be
allowed and accordingly, T.C.A.Nos.96 and 97 of 2013 are allowed.
12. Insofar as the appeal filed by the Revenue in T.C.A.Nos.456 and 457 of
2013, the issue as to whether the observation of the Tribunal that the provision made
for the “site restoration expenses”, is concerned, the same is ascertainable, but cannot
be claimed under Section 37(1) of the Income Tax Act, but only under Section 115-A
and Section 115-J, are already covered by the judgment of this Court in respect of the
same assessee for the previous assessment year in T.C.A.Nos.1483 to 1485 of 2010.
In that appeal, we have answered the substantial questions of law summarised as
under:
“While Section 33-ABA of the Act is incentive in nature and pre-deposit is
required to claim the benefit of the incentive, it is optional to the assessee to claim the
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
said incentive. Whereas, the “site restoration” is a mandatory requirement under the
contract and for such expenditure, the assessee is eligible to claim deduction under
Section 37(1) of the Act, it being the residuary clause, besides explicit deductions
provided under the Act”.
13. Therefore, we are of the view that the impugned order of the Income
Tax Appellate Tribunal, upholding the Assessment Order of dis-allowance claimed
by the assessee in respect of the site restoration, has to be set aside.
Accordingly, the same is set aside.
14. In the result,
(i) T.C.A.Nos.96 and 97 of 2013 filed by the assessee-Company, are
allowed.
(ii) T.C.A.Nos.456 and 457 of 2013 filed by the Revenue, stand dismissed.
There shall be no order as to costs.
(Dr.G.J., J) (R.S.V., J)
02.06.2026
Index : Yes/no
Speaking Order : Yes/no
Neutral Case Citation : Yes/no
cs
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
To,
1. The Assistant Director of Income Tax,
(International Taxation),
121, Nungambakkam High Road,
Chennai-600 034.
2. Director of Income Tax (International Taxation),
Chennai.
3. The Commissioner of Income Tax, Chennai.
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T.C.A.Nos.96 & 97 of 2013 & 456 and 457 of 2013
Dr.G.JAYACHANDRAN, J
and
R.SAKTHIVEL, J
cs/bsm
Pre-delivery judgment
in
T.C.A.Nos.96 and 97 of 2013 and 456 and 457 of 2013
Judgment delivered
on 02.06.2026
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