JUDGMENT judgment of court was delivered by Vijay Manohar Sahai, Actg. C. J.-The petitioner is foreign company based in Canada and has set up project office in India with permission of Reserve Bank of India. petitioner is subject to income-tax in India in accordance with provisions of income-tax laws in India. petitioner is engaged in exploration, development and production of mineral oil and natural gas. petitioner has been awarded right to explore, develop and produce mineral oil in various blocks. For this purpose, petitioner has entered into what is known as "production sharing contract" (for short "the PSC") with Government of India for exploration, development and production of "mineral oil". production sharing contract specifies area over which petitioner has been given such rights. Production sharing contract defines contract area as block. One such production sharing contract was entered into on September 23, 1994, and another on July 17, 2001, for exploration, development and production of mineral oil in Hazira and Surat block respectively. petitioner has been producing crude oil and natural gas from such blocks. petitioner has been claiming benefit of deduction of 100 per cent. of profits and gains from production of mineral oil and natural gas under section 80-IB(9), as it stood prior to amendment to section 80-IB(9) of Income-tax Act, 1961 (hereinafter referred to as "the Act"), which was introduced by Finance (No. 2) Act, 2009. In these proceedings constitutional validity of amendment to sub-section (9) of section 80-IB and Explanation added to it under Act by Finance (No. 2) Act, 2009, has been challenged. relevant portion of amendment in present proceedings read as under (see [2009] 315 ITR (St.) 60, 85): "37. In section 80-IB of Income-tax Act,- (a) for sub-section (9), following sub-section shall be substituted and shall be deemed to have been substituted with effect from 1st day of April, 2000, namely:- '(9) amount of deduction to undertaking shall be hundred per cent. of profits, for period of seven consecutive assessment years, including initial assessment year, if such undertaking fulfils any of following, namely:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st day of April, 1997; (iii) is engaged in refining of mineral oil and begins such refining on or after 1st day of October, 1998. Explanation.-For purposes of claiming deduction under this sub- section, all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India vide Resolution No. O-19018/22/95ONG.DO.VL dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single "undertaking".'; (b) in sub-section (9), as so substituted,- (A) in clause (iii), after words, figures and letters "'the 1st day of October, 1998', words, figures and letters'but not later than 31st day of March, 2012' shall be inserted; (B) after clause (iii), following clause shall be inserted with effect from 1st day of April, 2010, namely:- '(iv) is engaged in commercial production of natural gas in blocks licensed under eighth round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under New Exploration Licensing Policy announced by Government of India vide Resolution No. 0-19018/22/95- ONG.DO.VL dated February 10, 1999, and begins commercial production of natural gas on or after 1st day of April, 2009;' (emphasis supplied by us) We are concerned with amendments which have been highlighted above. relevant amendments in question are in two parts. first part is insertion of Explanation to section 80-IB(9) with retrospective effect from 1st day of April, 2000. This Explanation seeks to define meaning of term "undertaking". This section provides for deduction, from gross total income of any assessee, 100 per cent. of profits and gains of undertaking engaged in commercial production of "mineral oil". This deduction is available to assessees for period of seven consecutive assessment years, including initial assessment year in which undertaking commences commercial production, provided undertaking has commenced commercial production of mineral oil on or after April 1, 1997. second part of amendment is introduction of new subclause (iv) to section 80-IB(9) by which benefits of deduction under section 80- IB(9) have been conferred to persons engaged in commercial production of "natural gas". In blocks licensed under VIIIth round of bidding under New Exploration and Licensing Policy (NELP) and who begin commercial production of natural gas on or after 1st day of April, 2009. This amendment is effective from April 1, 2010, i.e., for assessment year 2010-11 onwards. We shall now deal with first part of amendment, namely, insertion of Explanation to section 80-IB(9) of Act by section 37 of Finance (No. 2) Act, 2009. benefits given in terms of section 80-IB to persons like petitioner were originally covered by section 80-IA and later on became part of section 80- IB. short legislative history of benefits as were available from time to time as is relevant for present proceedings is given in following paragraphs. Section 80-IA, as it stood with effect from April 1, 1999, under which tax benefits were available is reproduced below: "80-IA.(1) Where gross total income of assessee includes any profits and gains derived from any business of industrial undertaking or hotel or... commercial production or refining of mineral oil in North-Eastern Region or any part of India on or after 1st day of April, 1997 (such business being hereinafter referred to as eligible business), to which this section applies, there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, deduction from such profits and gains of amount equal to percentage specified in sub-section (5) and for such number of assessment years as is specified in sub- section (6)... (4E) This section applies to any undertaking which begins commercial production or refining of mineral oil in North-Eastern Region or in any part of India on or after 1st day of April, 1997: Provided that provisions of this section shall apply in case of refining of mineral oil where undertaking begins refining on or after 1st day of October, 1998... (5) amount referred to in sub-section (1) shall be-... (v) in case of undertaking referred to sub-section (4E) hundred per cent. of profits and gains derived from such business for initial seven assessment years." By amendment in Finance Act, 2001, when benefit to commercial production of mineral oil was shifted from section 80-IA to section 80-IB and said section 80-IB with effect from April 1, 2002, till its amendment by Finance Act, 2008, reads as under: "80-IB.(1) Where gross total income of assessee includes any profits and gains derived from any business referred to in subsections (3) to (11) (such business being hereinafter referred to as eligible business), there shall, in accordance with and subject to provision of this section, be allowed, in computing total income of assessee, deduction from such profits and gains of amount equal to such percentage and for such number of assessment years as specified in this section... (9) amount of deduction to undertaking which begins commercial production or refining of mineral oil shall be hundred per cent. of profits for period of seven consecutive assessment years, including initial assessment year: Provided that where undertaking is located in North-Eastern Region... and where is located in any part of India, it begins commercial production of mineral oil on or after 1st day of April 1997." Section 80-IB(9) was amended by Finance Act, 2008, but that amendment is not relevant for present proceedings. section was further amended by Finance (No. 2) Act, 2009, with effect from April 1, 2000, and as amended, said section reads as under: "(9) amount of deduction to undertaking shall be hundred per cent. of profits for period of seven consecutive assessment years, including initial assessment year, if such undertaking fulfils any of following, namely:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st day of April, 1997;... Explanation.-For purposes of claiming deduction under this sub- section, all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O19018/22/95-ONG.DO.VL, dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'." Paragraph 102 of Budget Speech of Finance (No. 2) Bill, 2009, reads as under (see [2009] 314 ITR (St.) 29, 51): "... Further, I also propose to retrospectively amend provisions of said section to provide that'undertaking' for purposes of section 80-IB(9) will mean all blocks awarded in any single contract." Memorandum to Finance (No. 2) Bill, 2009, by which above amendments were introduced reads as under (see [2009] 314 ITR (St.) 183, 201): "The term'undertaking' in sub-section (9) has not been defined. Therefore, in context of mineral oil, meaning of term 'undertaking' has been subject matter of considerable dispute. taxpayers have been holding view that every well in block licensed constitutes single'undertaking' and, accordingly, tax holiday is available separately for each such well. However, this view is against legislative intent. Accordingly, it is proposed to amend sub-section (9) by inserting Explanation so as to clarify that for purposes of claiming deduction under sub-section (9), all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India vide Resolution No. O-19018/22/95- ONG.DO.VL, dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'. This amendment is proposed to take retrospective effect from April 1, 2000, and will, accordingly, apply in relation to assessment year 2000-01 and subsequent years. This definition of'undertaking' will be applicable both in relation to mineral oil and natural gas." Notes on Clauses to Finance (No. 2) Bill, 2009, provide as under (see [2009] 314 ITR (St.) 126, 151): "It is further proposed to provide by way of Explanation that for purposes of claiming deduction under this sub-section, all blocks licensed under single contract which is, awarded under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O-19018/22/95- ONG.DO.VL. dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'. This amendment will take effect retrospectively from April 1, 2000, and will, accordingly, apply in relation to assessment year 2000-01 and subsequent years." Explanation added to section 80-IB(9) by Finance (No. 2) Act, 2009 (reproduced above), with retrospective effect from April 1, 2000, reads as under: "Explanation.-For purposes of claiming deduction under this sub- section, all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India vide Resolution No. O19018/22/95-ONG.DQ.VL dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'." At this stage, it would be useful to briefly set out history of Government's policy and tax holidays in regard to production of mineral oil in country. (i) Prior to 1999, Government had policy with respect to exploration, development and production of mineral oil in country, when private participation was permitted for first time under extant policy. (ii) It was under this policy that petitioner entered into its first production sharing contract on September 23, 1994, with Government of India and benefit of deduction to undertaking engaged in commercial production of mineral oil in any part of India on or after 1st day of April, 1997, was first introduced by Finance Act, 1998, in section 80-IA of Act. (iii) Government, in order to attract private investments in mineral oil sector, formulated New Exploration and Licensing Policy (NELP) which came to be notified in Official Gazette on February 10, 1999. Among other things, NELP stated that seven-year tax holiday from date of commencement of commercial production would be available to contractors under NELP. NELP also stated that separate Petroleum Tax Guide would be in place to facilitate investors. This Petroleum Tax Guide is compilation of laws relating to income- tax, customs duties, Central excise and other laws, as applicable to activities connected with prospecting for or extraction and production of petroleum in upstream sector under production sharing contract entered into on or after January 1, 1999. tax guide also provides that in event of inconsistency between this guide and any enactment or rules, relevant Act or Rule shall apply. Paragraph 5 of guide deals with income-tax provisions in relation to production sharing contract participants. Sub-paragraph 5(11) reads as under: "Under section 80-IA of Income-tax Act, 1961, production sharing contract participants who begin commercial production of petroleum in any part of India on or after April 1, 1997, shall be entitled to claim deduction of 100 per cent. of their profits and gains derived from such business for initial seven years commencing from first year of commercial production. term'commercial production' is defined as under in Petroleum Tax Guide: 'Commercial production' means production of petroleum (excluding any production for testing purposes) from field and delivery of same at relevant delivery point under programme of regular production and sale. date of commencement of commercial production will be date when commercial production commences from field and date of commencement of commercial production shall be intimated by contractor to Government of India in writing." word "undertaking" has not been defined in either section 80-IA or section 80-IB of Act and principles and attributes of what constitutes "undertaking", for purposes of these sections have been laid down in series of judgments of apex court and other High Courts of country starting from Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC); [1977] 2 SCC 368. petitioner has treated each well/cluster of wells as "undertaking" for purpose of claiming deduction under section 80-IB(9) of Act. In Hazira block, petitioner commenced commercial production of mineral oil in some of wells before April 1, 1997, but in some of well/cluster of wells, commercial production commenced after April 1, 1997. On basis that well/cluster of wells is "undertaking", petitioner has claimed benefits of deduction of profits and gains from such "undertakings" which commenced production after April 1, 1997, under section 80-IB(9). This claim was disallowed by Assessing Officer for assessment year 2001-02 relating to Hazira block on ground that since commercial production from Hazira block (even though from different well) commenced before April 1, 1997, it did not satisfy requirement of section 80-IB(9). According to Assessing Officer, it is date of first commercial production from block, as whole, was to be considered to determine entitlement of benefit under this section. On appeal by petitioner, Income-tax Appellate Tribunal (hereinafter referred to as "the ITAT"), by its order dated February 29, 2008, held that each well/cluster of wells constituted separate undertaking and, therefore, petitioner was entitled to deduction under section 80-IB(9) in respect of profits derived from each such well/cluster of wells for period of seven consecutive years from commencement of commercial production, in each such undertaking, consisting of well/cluster of wells. Income-tax Appellate Tribunal, thereafter, allowed similar claims for assessment years 2000-01, 2002-03 and 2003-04. respondent has gone in appeal against orders of Income-tax Appellate Tribunal before this court, which is pending. Consequent upon introduction of Explanation to section 80-IB(9) by Finance (No. 2) Act, 2009, defining term "undertaking" to mean "all blocks licensed under single contract" with retrospective effect from April 1, 2000, by order dated September 7, 2009, claim of petitioner for assessment year 2006-07 under section 80-IB(9) was disallowed by Assessing Officer. petitioner challenges constitutional validity of retrospective amendment to section 80-IB(9) on ground of it being arbitrary and unreasonable and thus ultra vires article 14 of Constitution of India as well as on other grounds. We have heard Mr. S. N. Soparkar, learned senior counsel assisted by Mr. Tanvish Bhatt, learned counsel appearing for M/s. Wadia Ghandy and Co. for petitioner in Special Civil Application No. 13134 of 2009 with learned counsel Mrs. Swati Soparkar and Mr. Bandish S. Soparkar appearing for petitioner in Special Civil Application No. 10903 of 2009, Mr. Mihir Joshi, learned senior counsel assisted by Mr. Nitin K. Mehta appearing for respondent No. 2 in Special Civil Application No. 13134 of 2009 with Mr. Sudhir M. Mehta, learned counsel appearing for respondent No. 2 in Special Civil Application No. 10903 of 2009 and Mr. Shakeel A. Qureshi, learned Central Government standing counsel appearing for respondent No. 1 in both writ petitions. Though we have heard both petitions together but for convenience, we have treated Special Civil Application No. 13134 of 2009 to be leading writ petition. Mr. S. N. Soparkar, learned senior counsel for petitioner, has contended that this amendment is not merely clarificatory in nature but is substantive retrospective amendment and inasmuch as it takes away vested rights, it is arbitrary and unreasonable and is liable to be struck down as being ultra vires article 14. 25.1 other contentions of learned senior counsel for petitioner are set forth below. 25.2 According to learned senior counsel, background facts for introduction of New Exploration Licensing Policy (NELP) was that ownership of natural resources embedded in sea bed and ground vests in State and policy for exploitation of said resources was also formulated by Central Government. In order that private sector companies are attracted to participate in exploration, development and production of hydrocarbons, NELP was notified by Central Government and it provided certain assurances to prospective participants. Under NELP, Central Government invited offers for exploration of mineral oil for every block and commenced process of entering into production sharing contract with successful bidders who is nomenclature as contractor under production sharing contract. 25.3 learned senior counsel drew attention of court to notice inviting offers under NELP, where under heading "main features of terms offered". It was stated that "income-tax holiday for 7 years from start of commercial production" will be available and further that "to facilitate investors, Petroleum Tax Guide (PTG) is in place". gas basin comprises huge area and each basin may comprise number of blocks with delineated areas. Each block may have one or more gas or oil fields where hydrocarbons had been discovered. Every field may have one or more wells, depending on extent of mineral oil reserve driven by technical requirements. Once discovery is announced and declared to be "commercial discovery", elaborate process has been laid down in production sharing contract not only for approving it as commercial discovery but right down to number of wells which contractor was to drill. For this purpose separate development plan for development of each field is prepared by contractor and is approved by body known as management committee in which Government has veto power. He submitted that each of such wells/cluster of wells is separate and independent undertaking. Moreover, notice inviting offers and production sharing contract envisage exploration period, followed by development and production period. exploration period is maximum of 7 years. He further submitted that while notice inviting offers envisaged production in phased manner, it is contradiction to state that period of 7 years exemption for entire block, should commence from time when first well started commercial production. learned senior counsel further contented that exploration, development and production, are phase-wise for every block and it would not be right to state that period of seven years for entire block would commence from date of commercial production in very first well, when other areas of block were still under exploration or development phase as stipulated in production sharing contract. term "undertaking", therefore, cannot be construed to mean entire block to reckon period of seven years of tax holiday. 25.4 According to learned senior counsel various clauses of Petroleum Tax Guide define "commercial production" to mean production of petroleum from field in commercial quantities. provisions of Act which have been set forth in Tax Guide and in particular in view of statement under section 80- IA of Act production sharing contract participants who begin commercial production of petroleum in any part of India on or after April 1, 1997, shall be entitled to claim deduction of 100 per cent. of their profits and gains derived from such businesses for initial seven years commencing from first year of commercial production, phrase "commercial production" has to be read and understood in context of field in respect of which development plan had been approved and not entire block. 25.5 Reading of various clauses in production sharing contract clearly demonstrate that term "undertaking" was never construed to mean entire block area. Each well/clusters of wells depending upon development plan, approval is separate and independent undertaking and commercial production from each such undertaking is under supervision and scrutiny of Central Government. In this context, definitions of "commercial production", "contract area", "development area" were stressed to point out that while contract area means area of entire block, development area is part of "contract area" which may encompass one or more commercial discoveries. development area in block can be more than one and each development area may be independent and each such area may be identified and developed in phased manner. definition of term "commercial production" read with definition of same word in Petroleum Tax Guide clearly shows that commercial production has to be read in context of field which can be development area. definition of term "development operations" and "development plan" were stressed to point out that there is separate plan approved by management committee for development of commercial discovery for development area or field. It was pointed out that there can be more than one development plan for development of block and every development area or field which may consist of one well/cluster of wells is separate and independent undertaking, as this term has been understood both by contractor and Government. Several other definitions such as "discovery", "discovery area", "exploration operations", "exploration period", "exploration phase", "field", "production cost", "well" were referred to emphasise this point. 25.6 It was further contended that it has been stipulated in production sharing contract that Central Government would closely scrutinise and sharing contract that Central Government would closely scrutinise and approve every stage of exploration, development and production of mineral oil. It was pointed out that Central Government is not only in majority in managing committee under production sharing contract but also has veto power. learned counsel pointed out fact that in course of development of block and in some cases of field, development plans consisting of either single well/cluster of wells had been approved. Thus, Central Government has always been aware that there are more than one undertaking in each block, has acted on this premise in approving more than one commercial discovery in each development area of block and cannot now introduce by retrospective amendment, concept that entire block would be single undertaking, and that such amendment is liable to be struck down as unreasonable and arbitrary. 25.7 learned senior counsel for petitioner cited various authorities which are for purposes of benefits of Act defining term "undertaking" which go to show that development area or field within block with well/cluster of wells can be considered as separate undertaking. 25.8 In Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 (SC); [1977] 2 SCC 368 apex court has laid down principles of what constitutes "undertaking". Manufacture of production of articles yielding additional profits attributable to new outlay of capital is separate and distinct unit. fact that assessee, by establishment of new industrial undertaking, expands his existing business which he certainly does, would not on that score deprive him of benefits under section 15C of Act. true test is not whether new industrial undertaking connotes expansion of existing business of assessee but whether it is all same new and identifiable undertaking separate and distinct from existing business. undertaking is formed out of existing business if physical identity of old unit is preserved. new activity may produce same commodities of old business or it may produce some other distinct marketable commodities. 25.9 Gujarat High Court in Gujarat Alkalies and Chemicals Ltd. v. CIT [2013] 350 ITR 94 (Guj) held that new unit, even if it derived help from existing unit and is dependent on existing undertaking, will not deprive new undertaking status of separate and distinct identity. 25.10 learned senior counsel contended that introduction of Explanation in section 80-IB(9) by Finance (No. 2) Act, 2009, with retrospective effect from April 1, 2000, is substantive amendment which takes away vested right of petitioner. It is arbitrary, unreasonable and ultra vires to article 14 of Constitution of India and is liable to be struck down. He further contended that Explanation has been introduced solely to supersede various judgments of tribunals/courts which have rightly interpreted and held that well/cluster of wells is "undertaking". He contended that amendment, retrospectively, deprives persons similarly placed as petitioners of their legitimate vested rights. amendment such as this can never be considered clarificatory but is in nature of unreasonable substantive retrospective amendment and is liable to be struck down. counsel relied upon following judgments to canvas contentions raised by him in this regard. According to learned counsel: (i) When retrospective amendment is arbitrary and unreasonable and imposes unforeseen financial burden, it is liable to be struck down as violative of article 14. Three factors determining whether retrospective amendment is so unreasonable or confiscatory that it violates article 14 and article19 of Constitution are (i) context in which retrospectivity was contemplated, (ii) period of such retrospectivity, and (iii) degree of any unforeseen or unforeseeable financial burden imposed for past period. Avani Exports v. CIT [2012] 348 ITR 391 (Guj). (ii) Only retrospective amendments which are in nature of Validating Act which seek to validate earlier Acts declared illegal and unconstitutional by courts by removing defect or lacuna and which are not unreasonable and arbitrary are valid and not violative of article 14 to extent that such retrospective amendment which is in nature of Validating Act is not reasonable and is liable to be struck down. D. Cawasji and Co. v. State of Mysore [1984] 150 ITR 648 (SC); Rai Ramakrishna v. State of Bihar [1963] 50 ITR 171 (SC); National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 (SC); [2003] 5 SCC 23. (iii) Explanation cannot take away statutory right given to any person under statute. S. Sundaram Pillai v. V. R. Pattabiraman [1985] 1 SCC 591. (iv) insertion of Explanation which is really clarificatory in nature even though retrospective is valid. Katira Construction Ltd. v. Union of India [2013] 352 ITR 513 (Guj). (v) There should be reasonably and rationale behind retrospective amendment, otherwise liable to be struck down. action taken by State cannot be so irrational and so arbitrary so as to introduce one set of rules for one period and another set of rules for another period by amending law in such manner as to withdraw benefit that has been given earlier resulting in higher burden without any reason. Tata Motors v. State of Maharashtra [2004] 136 STC 1 (SC); AIR 2004 SC 3618. (vi) Taxing statute is not immune from challenge under article 14, State of Kerala v. Haji K. Haji K. Kutty Naha, AIR 1969 SC 378; Arya Vaidya Pharmacy v. State of Tamil Nadu [1989] 73 STC 346 (SC); [1989] 2 SCC 285. 25.11 It was further contended that although included by amendment as Explanation, real purport of amendment was not to explain any provision but to retrospectively amend statute in manner so as to take away rights vested in petitioner and subject petitioner to financial liabilities which did not exist at relevant time retrospectively in arbitrary and unreasonable manner by amendment which was of substantive nature. 25.12 It was further contended by learned senior counsel that benefits of deduction under section 80-IA were expressly made available with effect from April 1, 1999, by amending then existing section 80-IA. Later on section 80-IB(9) was introduced to provide for such benefits. At all times benefit had been available to "undertaking". Neither section 80-IA, section 80- IB nor provisions of production sharing contract provided that "undertaking" would be construed as whole block. meaning of word "undertaking" was always clear as laid down by catena of judgments including that of apex court. Thus, Government as well as petitioner clearly understood meaning of term "undertaking" as essentially independent economic unit and it was vested right conferred by statute. Thus, law was unambiguous as to meaning of word "undertaking". amendment is not clarificatory but substantive, which takes away vested rights retrospectively putting additional financial burden on petitioner which was not permissible. 25.13 learned senior counsel for petitioner fairly conceded that principles of promissory estoppels, equity and article 19(1)(g) are not applicable to facts of case of petitioner but in given case in which provisions of article 19 can be properly invoked, this would be applicable. On other hand, Mr. Mihir Joshi, learned senior counsel for respondent No. 2, contended that any legislation cannot be struck down on basis of article 14 alone. In this case, there is no vested right whatsoever in petitioner and even if petitioner had vested right, it can be taken away by Legislature and test before court can only be whether it is reasonable or not. 26.1 other contentions of learned senior counsel for respondent are set forth below: 26.2 petitioner's contention that assurances have been provided by Government in NELP and Petroleum Tax Guide would be of no assistance to petitioner as this do not vest any rights in petitioner. NELP has stated that tax holiday will be available for period of seven years from date of commencement of commercial production. NELP does not make reference to commercial production from well or cluster of wells while referring to tax holiday. NELP also states Tax Guide is only to facilitate investors and states that in case of any inconsistency between Tax Guide and provisions of any legislation, provisions of relevant Act would prevail. Clause 3 of NELP states that block will be carved out for offering. contract area as defined in production sharing contract means entire area of block and not one or cluster of wells. definition of commercial production in production sharing contract is production of crude oil, condensate or natural gas from contract area. term "field" is defined to mean oil or gas field or combination of both, as case may be. Therefore, term "commercial production" relates to field and contract area and not wells. production sharing contract also states that companies shall be eligible for benefit under section 80-IA of Act as applicable from time to time. This clearly indicates that law can be changed at any time and deductions as per law as may be amended from time to time only would be available to petitioner. Further, clause 17.10 of production sharing contract provides that if, due to any change in law dealing with income-tax or any other tax, which results in material change to expected economic benefits accruing to any of parties after date of execution of contract, parties shall promptly consult in good faith to make necessary revisions and adjustments to contract in order to maintain expected economic benefit to such affected parties. There, however, has never been any vested right, as is being claimed by petitioner. These are no rights vested by statute. At best, these can be considered to be contractual rights under contract with Government which can be taken away, modified or withdrawn. Even assuming that such rights are vested in petitioner, these rights have not been available and/or have not arisen as yet. respondents have not admitted these rights at any time during assessment proceedings. vested right can only accrue by action of any authority in positive manner or right acquired by final adjudication by competent court. only vested right in this case is benefit conferred by section for seven years which has not been taken away. 26.3 Explanation, according to learned senior counsel, has been inserted by Legislature to resolve dispute regarding interpretation of provision of law. Explanation such as this cannot be considered to be unreasonable or ultra vires. Explanation has not modified any charging provision but is part of Chapter dealing with deductions from profits and gains and was not susceptible to any challenge. retrospective amendment provides Explanation which is clarificatory in nature and does not relate to levy or make substantive amendment and, therefore, there was no question of it being unreasonable. 26.4 contention of petitioner that Central Government always controlled exploration, development and production is not correct. production sharing contract provided discretion to petitioner to deal with production sharing contract provided discretion to petitioner to deal with discoveries, development and working of development area. Under production sharing contract, fact that petitioner has right to retain areas rich in mineral oil after exploration is over is pointer to fact that total area retained by contractor is "undertaking" and each well or cluster of wells do not constitute "undertaking". learned senior counsel contended that position of petitioner with regard to "undertaking" is not unambiguous since interchangeably well and sometimes cluster of wells has been treated as undertaking to suit its convenience. learned senior counsel stated that judgments relied upon by petitioner for meaning of "undertaking" were in relation to industries which were producing goods and these cannot be equated to facts and circumstances in cases of mineral oil exploration, development and production. 26.5 learned senior counsel for respondent has contended that provisions of article 19(1)(g) are not available to petitioner as no citizen of India is party to petition. 26.6 learned senior counsel further contended that article 14 deals only with discrimination and provides for equality before law. contentions of petitioner with regard to unreasonableness cannot be sustained under article 14. learned senior counsel for respondent further contended as follows: (i) There are established principles while considering constitutional validity of statute said to be violative of article 14. There is presumption in favour of constitutionality of statute. burden is upon person who impugns provisions to show that there has been transgression. Law relating to economic activities should be viewed with greater latitude. R. K. Garg v. Union of India [1982] 133 ITR 239 (SC); [1981] 4 SCC 675. (ii) Only palpable arbitrariness can be faulted as discriminatory and violative of article 14. Shashikant Laxman Kale v. Union of India [1990] 185 ITR 104 (SC); [1990] 4 SCC 366. (iii) burden of proving discrimination is more in case of taxing statutes. Laws relating to economic activities should be viewed with greater latitude than laws touching civil rights. Associated Cement Companies Ltd. v. Government of Andhra Pradesh [2006] 144 STC 342 (SC); [2006] 1 SCC 597. (iv) When assessments have not become final, no right can be said to be vested. Escorts Ltd. v. Union of India [1993] 199 ITR 43 (SC); [1993] 1 SCC 249. (v) Clarifications to end dispute does not give rise to vested interest. WPIL Ltd. v. CCE [2005] 3 SCC 73. (vi) Retrospective amendment is possible even in case of pending proceedings. Epari Chinna Krishna Moorthy v. State of Orissa [1964] 15 STC 461 (SC); AIR 1964 SC 1581. (vii) Legislature is empowered to cure statute and such curative statute is always valid when there is no finality in judicial procedure. National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 (SC); [2003] 5 SCC 23. (viii) Even in case of pending assessment, if Legislature makes explicit what was implicit, then same is not ultra vires. Escorts Ltd. v. Union of India [1993] 199 ITR 43 (SC); [1993] 1 SCC 249. (ix) Mere arbitrariness is not sufficient, it requires palpable arbitrariness for court to intervene. State of Madhya Pradesh v. Rakesh Kohli [2012] 6 SCC 312. (x) A'declaratory amendment' in nature of declaring meaning of existing statute does not widen scope of purview of existing provision and, therefore, is not susceptible to challenge. CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625 (SC); [1997] 5 SCC 482. (xi) Retrospectivity is challengeable, only if it is unreasonable, i.e., confiscatory or extortionate in nature. Assistant Commissioner of Urban Land Tax v. Buckingham and Carnatic Co. Ltd. [1969] 2 SCC 55; [1970] 75 ITR 603 (SC). (xii) factors which are generally considered in determining whether retrospective amendment is so unreasonable or confiscatory that it violates are (i) context in which retrospectivity is contemplated, (ii) period of such retrospectivity, and (iii) degree of any unforeseen or unforeseeable financial burden imposed for past period. period of retrospectivity is irrelevant when amendment is justified and clarificatory. R. C. Tobacco (P.) Ltd. v. Union of India [2005] 7 SCC 725. (xiii) company does not have fundamental rights. Unreasonableness cannot be challenged under article 14 alone. Shree Sidhbali Steels Ltd. v. State of Uttar Pradesh [2011] 3 SCC 193. (xiv) No justification is required to be given by Legislature for enacting retrospective amendment. Entertainment Tax Officer v. Ambae Picture Palace [1994] 1 SCC 209; [1995] 96 STC 338 (SC). 27.1 It was contended that amendment is not colourable exercise of power since Tribunal's judgments are not statutes and respondent has preferred appeals in High Court and amendment is in nature of clarification to pending dispute. 27.2 He further contended that assuming that parties agreed to treat each well as "undertaking" and amendment was contrary to terms of contract, such as this, even then it would not invalidate amendment. contractual vested right cannot be reason to strike down amendment to law. On second issue involved in petition is whether term "mineral oil" includes "natural gas", contention of Mr. S. N. Soparkar, learned senior counsel for petitioner, is that this amendment has effect of erroneously considering that term "mineral oil" does not include natural gas prior to this amendment. This amendment is unreasonable and in any event not in consonance with industry norms and technical realities. terms "oil and gas" are always used in conjunction. Income-tax Department has interpreted insertion of sub-clause (iv) to section 80-IB(9) in this manner and has denied benefit to petitioner on this count. If this is interpretation, this amendment artificially restricts tax benefit under section 80-IB(9) of Act only to commercial production of natural gas in NELP eighth round of bidding as opposed to position settled by Tribunal in petitioner's own case which clarifies that mineral oil as understood always included natural gas. This also creates anomalous position creating two classes of assessees for purpose of availing of deduction under section 80-IB(9), i.e., one who is engaged in commercial production of natural gas in blocks licensed under eighth round of bidding and begins commercial production of natural gas on or after 1st day of April, 2009, and another who has commenced commercial production of natural gas in blocks licensed under pre NELP eighth round of bidding. Therefore, this amendment is arbitrary and unreasonable and liable to be struck down as being ultra vires article 14. Mr. Mihir Joshi, learned senior counsel appearing for respondent No. 2, has forcefully submitted that it has been consistent position of Revenue that mineral oil does not include natural gas. He further contended that whenever Legislature desired so, it had used terms mineral oil and natural gas distinct from each other in different provisions in Act. Learned Central Government standing counsel for respondent No. 1 Mr. Shakeel A. Qureshi has urged that impugned amendment made in Act retrospectively is valid piece of legislation and does not suffer from any infirmity nor it violates any constitutional provision. amendment made by Finance (No. 2) Act, 2009, is liable to be upheld. He further relied on case law and arguments of Mr. Mihir Joshi, learned senior counsel and has adopted it as part of his argument. We have examined rival contentions and, according to us, following issues fall for consideration in this matter: (i) Whether insertion of Explanation to section 80-IB(9) of Income-tax Act, 1961, by Finance (No. 2) Act, 2009, with retrospective effect from April 1, 2000, explaining meaning of term "undertaking" is unconstitutional and ultra vires article 14 of Constitution of India? (ii) Whether insertion of sub clause (iv) in section 80-IB(9) of Income-tax Act, 1961, by Finance (No. 2) Act, 2009, conferring benefit of deduction under this section to undertakings engaged in commercial production of natural gas in blocks licensed under eighth round of bidding provided such commercial production commenced on or after April 1, 2009, results in denial of benefit of deduction under section 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to NELP VIII on interpretation thereof that term "mineral oil" would not include natural gas since benefit was available only to undertakings engaged in commercial production of "mineral oil" rendered newly added sub-clause (iv) unconstitutional and ultra vires article 14 of Constitution of India? (iii) Whether petitioner has any accrued or vested right? Whether term "mineral oil" would include gas? We propose to deal with second issue first. Before we go into issue of constitutional validity and vires of amendments by insertion of sub-clause (iv) to section 80-IB(9) to Act, it will be profitable to understand meaning and import of expression "mineral oil". term "mineral oil" has not been defined under Act. respondent seeks to rely on Explanation to section 42 which, for purpose of that section, explains "mineral oil" as including both, petroleum and natural gas. Explanation qualifies applicability only to section 42 of Act. It is, therefore, contended that "mineral oil" under section 80-IB should be so construed so as not to include natural gas and Explanation under section 42 cannot be looked at in construing provisions of section 80-IB. This contention would merit consideration if mineral oil has either been defined under Act or has acquired natural, commercial or interpretative meaning so as to exclude natural gas. Section 80-IB(9)(ii) of Act provides for same exemption to undertakings located in any part of India which began commercial production of mineral oil on or after April 1, 1997. Apart from use of term "undertaking", this provision also uses term "mineral oil". It is necessary to consider scope and amplitude of these terms in context of provisions of sections 80-IB particularly in view of fact that while amending provisions of this section in manner aforesaid, section 80- IB(9)(ii) has remained unamended. question whether natural gas is encompassed in term "mineral oil" came up for consideration before Constitutional Bench of apex court in case of Association of Natural Gas v. Union of India [2004] 4 SCC 489. question arose as to legislative competence of State to enact laws on natural gas in terms of entry 25 of List II of Seventh Schedule to Constitution. Union of India contended that exclusive domain power and competence to legislate on natural gas is available only to Parliament by virtue of entry 53, List I of Seventh Schedule. 35.1 Entry 53 of List I of Seventh Schedule reads as under: "Regulation and development of oil fields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable." 35.2 Entry 25, List II reads as follows: "Gas and gas-works." 35.3 State contended that expression "gas" in entry 25, List II takes within its ambit "natural gas", natural gas is widely used as energy source and State alone would be in position to exploit resources and distribute them to consumers. Natural gas is classified in several broad categories such as wet gas, lean gas, dry gas, sour gas and sweet gas. State also contended that natural gases are not associated with any petroleum products, and, therefore, State has legislative competence to pass legislation in respect of natural gas, as it is not petroleum gas. 35.4 apex court framed following question in paragraph 19 of decision: "The controversy in instant case could only be resolved by examining question whether expression'petroleum and petroleum products', or'mineral oil resources' mentioned in entry 53 of List I of Seventh Schedule would take in its compass natural gas or its derivative forms." 35.5 relevant portions of this decision is reproduced below: "20. In Kirk-Othomer: Encyclopedia of Chemical Technology, (third edition), volume, 11, page 630,'natural gas' is defined as naturally occurring mixture of hydrocarbon and non-hydrocarbon gases found in porous geologic formations beneath earth's surface, often in association with petroleum.... 22. Natural gas is found in areas of earth that are covered with sedimentary rocks. These sediments were first laid down during Cambrian period, ca 500 million years ago, and this process continued until end of Tertiary period ca 100 million years ago. These sediments contain organic source materials from which natural gas and petroleum were produced. Gas and petroleum, being less dense than water present in rocks, tended to migrate upward until contained under impervious rock barriers. 23. On page 634 of above Encyclopedia, natural gas is classified in several broad categories based on chemical composition, which are: (1) wet gas contains condensable hydrocarbons such as propane, butane, and pentane; (2) lean gas denotes absence of condensable hydrocarbons; (3) dry gas is gas whose water content has been reduced by dehydration process; (4) sour gas contains hydrogen sulfide and other sulfur compounds; and (5) sweet gas denotes absence of hydrogen sulfide and other sulfur compounds. Natural gas sold to public is described as lean, dry and sweet... 27. In Volume 17 on page 119, it is stated that term'petroleum', literally, rock oil, is applied to deposits of oily material found in upper strata of earth's crust. Petroleum was formed by complex and incompletely understood series of chemical reactions from organic material laid down in previous geological eras. Large deposits have been found in widely different parts of world and their chemical composition varies greatly. Consequently, no single composition of petroleum can be defined. It is not surprising that composition varies since local distribution of plant, animal and marine life is quite varied and, presumably, was similarly varied when petroleum precursors were formed. 28. As per New Book of Popular Science, volume 2, petroleum is oily, inflammable, liquid made up mostly of hydrocarbons-compounds containing only hydrogen and carbon. hydrogen content of petroleum ranges from 50 per cent. to 98 per cent. rest is made up chiefly of organic compounds containing oxygen, nitrogen, or sulphur. 29. According to widely held theory, remains of countless small marine animals and plants dropped to ocean bottom and were covered over by mud. Many layers of mud and plant and animal remains accumulated in course of time. These sediments were subjected to great pressure and heat, and were often squeezed and distorted as earth's crust moved. Gradually they were converted into layers of sedimentary rock. plant and animal remains contained within them were transformed into petroleum and natural gas. details of this transformation are not quite clear. 30. Gas and oil are found in huge subterranean caverns. They both occur in minute pores of such rocks as sandstone and limestone. They are held captive under great pressure by surrounding rock formations that are impervious to seepage. Finally, they are released when shifting of earth's surface cracks cap rock. 31.'Natural gas' has been defined in Webster's new 20th Century Dictionary, unabridged second edition, as follows: 'Natural gas: mixture of gaseous hydrocarbons, chiefly methane, occurring naturally in earth in certain place, from which it is piped to cities, etc., to be used as fuel.' (page 756). 32. In Ballantine's Law Dictionary, third edition 1969,'natural gas' has been defined as'a mineral in form of vapour'.'A gas characterised by hydrocarbons in mixture, occurring naturally in crust of earth, obtained by drilling, and piped to cities and villages, industrial and commercial centres, for use in heating, illumination and other purposes... 35. All materials produced before us would only show that natural gas is petroleum product. It is also important to note that in various legislations covering field of petroleum and petroleum products, either word'petroleum' or'petroleum products' has been defined in inclusive way, so as to include natural gas. In Encyclopaedia Britannica, fifteenth edition, volume 19, page 589 (1990), it is stated that "liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten expression'petroleum and natural gas' to'petroleum' when referring to both". word petroleum literally means'rock oil'. It originated from Latin term petra- oleum. (petra-means rock or stone and oleum-means oil). Thus, natural gas could very well be comprehended within expression'petroleum' or'petroleum product'... 37. survey of various legislations on topic would show that term'petroleum' or'petroleum products' has been given wide meaning to include natural gas and other similar products. 38. In Pipelines Act, 1962, of United Kingdom,'petroleum' has been defined as follows: 'Petroleum includes any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, whether or not it has undergone any processing; but does not include coal or bituminous shales or other stratified deposits from which ail can be extracted by destructive distillation.' 39. Petroleum has been variously defined in different Acts noted herein below: 'Petroleum (Production) Act, 1934 (UK) "Petroleum" includes any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, but does not include coal or bituminous shales or other shales or other stratified deposits from which oil can be extracted by destructive distillation'. Petroleum Act, 2000 (section 4), Australia '"Petroleum" means naturally occurring substance consisting of hydrocarbon or mixture of hydrocarbons in gaseous, liquid or solid state but does not include coal or shale unless occurring in circumstances in which use of techniques for coal seam methane production or in situ gasification would be appropriate.' appropriate.' Liquid Fuel Emergency Act, 1984 (section 3) 'petroleum' means: (a) any naturally occurring hydrocarbon or mixture of hydrocarbons, whether in gaseous, liquid or solid state; or (b) any naturally occurring mixture of hydrocarbon or hydrocarbons and of another substance or other substances, whether in gaseous, liquid or solid state. 40. various legislations passed by Indian Parliament and relevant rules also would show that'natural gas' was treated as mineral oil resource or petroleum product. 1. Oil Fields (Regulation and Development) Act, 1948 3. (c)'Mineral oils" include natural gas and petroleum. 2. Mines Act, 1952 '2. (jj) "minerals" means all substances which can be obtained from earth by mining, digging, drilling, dredging, hydraulicking, quarrying or by any other operation and includes mineral oils (which in turn include natural gas and petroleum).' 3. Mines and Minerals (Development and Regulation) Act, 1957 '3. (b) "minerals oils" includes natural gas and petroleum.;' 4. Petroleum and Natural Gas Rules, 1959 '3. (k) "Petroleum" means naturally occurring hydrocarbons in free state, whether in form of natural gas or in liquid viscous or solid form, but does not include helium occurring in association with petroleum, or coal, or shale, or any substance which may be extracted from coal, shale, or other rock by application of heat or by chemical process... (n)'petroleum product' means any commodity made from petroleum or natural gas and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas gasoline, naphtha, distillate, gasoline, kerosene, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by-products derived from oil condensate, gas or petroleum hydrocarbons, whether herein enumerated or not.' 5. Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 '2. (c) "petroleum" has same meaning as in Petroleum Act, 1934, and includes natural gas and refinery gas.' 6. Oil Industry (Development) Act, 1974 '2. (h) "mineral oil" includes petroleum and natural gas;... (m) "petroleum product" means any commodity made from petroleum or natural gas and includes refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil residuum, casing head gasoline, natural gas, gasoline, naphtha, distillate gasoline, kerosene, bitumen, asphalt and tar, waste oil, blended gasoline, lubricating oil, blends or mixture of oil with one or more liquid products or by products derived from oil or gas and blends or mixtures of two or more liquid products or by- products derived from oil condensate and gas or petroleum hydrocarbons not specified herein before;' 42... Thus, legislative history and definition of'petroleum','petroleum products' and'mineral oil resources' contained in various legislations and books and national interest involved in equitable distribution of natural gas amongst States-all these factors lead to inescapable conclusion that'natural gas' in raw and liquefied form is petroleum product and part of mineral oil resource, which needs to be regulated by Union." 35.6 Constitutional Bench, after considering "natural gas is mineral in form of vapour"; "a gas characterised by hydrocarbon in mixtures"; "Natural gas is found in areas of earth covered by sedimentary rocks. Gas and petroleum being less dense than water present in rocks tends to migrate upwards"; and "liquid and gaseous hydrocarbon are so intimately associated in nature that it has become customary to shorten expression "petroleum and natural gas" to "petroleum" when referring to both concluded as follows: "(i) All materials produced before us would only show that natural gas is petroleum product. It is also important to note that in various legislations covering field of petroleum and petroleum products, either word'petroleum' or'petroleum products' has been defined in inclusive way, so as to include natural gas, Encyclopedia Britannica, fifteenth edition, volume 19, page 589 (1990), it is stated that'liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten expression "petroleum and natural gas" to "petroleum" when referring to both. word "petroleum" literally means'rock oil', it originated from Latin term petra-oleum. (petra-means rock or stone and oleum-means oil). Thus, natural gas could very well be comprehended within expression'petroleum' or'petroleum product'. (ii) In paragraph 37, it held'a survey of various legislations on topic would show that term "petroleum" or "petroleum products" has been given wide meaning to include natural gas and other similar products'. (iii) In paragraph 41, it held'production of natural gas is not independent of production of other petroleum products; though from some wells natural gas alone would emanate, other products may emanate from sub terrain chambers of earth, But all oil fields explored for their potential hydrocarbon'. (iv) In paragraph 42 it held that legislative history and definition of'petroleum','petroleum products' and'mineral oil resources' contained in various legislations and books and national interest involved in equitable distribution of natural gas amongst States-all these factors lead to inescapable conclusion that'natural gas' in raw and liquefied form is petroleum product and part of mineral oil resource, which needs to be regulated by Union of India." 35.7 apex court in unequivocal terms has held that, "natural gas in raw and liquefied form is petroleum product and part of mineral oil resources". In light of above judgment and in absence of any specific definition of mineral oil under section 80-IB of Act any reference to mineral oil in its natural, commercial and technical sense will include petroleum products and natural gas. decision rendered by apex court in Association of Natural Gas' case would squarely apply. In absence of definition under section 80-IB of Act, if reliance has to be placed on allied enactments passed by Parliament, this would also lead to clear conclusion that mineral oil includes natural gas. 35.8 It is, therefore, clear that expression "mineral oil" would include and encompass within itself, both petroleum products and natural gas. When one deals with provisions of production sharing contract or any taxing statute, without doubt mineral oil is genus and contains within its ambit petroleum products and natural gas as its species. term "natural gas" may not be sufficient to include petroleum product or mineral oil. On contrary, expression "mineral oil" is wide enough to encompass within itself petroleum products and natural gas. contention of respondent that petroleum products and natural gas have been made part of mineral oil only through inclusive provisions contained in sections 42, 44BB and 293A and its conspicuous absence in section 80-IB has to be inferred that purpose of section 80-IB, mineral oil would not include petroleum products and natural gas. This contention of learned counsel for respondent needs to be rejected for following reasons: (i) judgment of apex court makes it very clear that expression "mineral oil" encompasses within itself petroleum products and natural gas. (ii) Constitutional Bench judgment was delivered on March 25, 2004. Explanation in sections 42 and 293A was introduced, vide Finance Act, 1981, effective from April 1, 1981.The Explanation of section 44BB was again introduced, vide Finance Act, 1987, with retrospective effect from April 1, 1983. (iii) judgment of apex court which is later in time after considering technical, commercial and legislative meaning have concluded that mineral oil would encompass within itself petroleum products and natural gas. (iv) In light of judgment of Constitutional Bench of apex court, Explanation in these sections have to be read and referred to only as abundant caution. 35.9 If Explanation has to be given preference then it would amount to reading or rewriting decision of apex court that mineral oil in its natural sense would not include natural gas. On contrary, paragraph 48 of judgment uses expression "all these factors lead to inescapable conclusion" that natural gas in raw and liquefied form is petroleum product and part of mineral oil resources. 35.10 In fact, there is no dispute or contest on facts between Union and States as to what would constitute "natural gas" and its broad categories and chemical compositions. apex court referred to technical literature and advancement in science in use of liquefied natural gas. contention of State that natural gas do not fall within genre of petroleum products and mineral oil stood rejected by holding that natural gas in raw and liquefied form is petroleum product and part of mineral oil resources. 35.11 Section 80-IB of Act has not defined mineral oil nor has it excluded petroleum products and natural gas. It is not alien to tax laws to have scripted definition to suit particular enactment or introduce deeming provisions. amendments to section 80-IB do not define or restrict meaning of mineral oil or even introduce such deeming provisions. ratio and findings of Constitution Bench judgment apply squarely to controversy in this case. judgment conclusively covers issue and we have no hesitation in concluding that term "mineral oil" in section 80-IB of Act takes within its purview both petroleum products and natural gas. 35.12 Before parting with this issue, we need to examine one more aspect. Constitutional Bench resolved conflict as to domain competence to legislate on natural gas by holding that natural gas is nothing but part of mineral oil and exclusive competence to regulate is vested only with Union or Parliament and power of State are completely denuded. It is by virtue of its power under entry 53, Central Government has entered into production sharing contract (PSC) with parties like petitioner granting them rights to explore, develop and produce mineral oil which also encompasses natural gas. proposition that even though findings of apex court are unequivocal, for purpose of section 80-IB term "mineral oil" would not encompass within its purview, natural gas only has to be stated to be rejected. 35.13 judgment of apex court holds field. ratio of this judgment remains unaffected by subsequent amendments to section 80- IB(9)(ii). insertion of sub-clause (iv) to section 80-IB(9) does not militate against meaning attributed to expression "mineral oil" by apex court, entry 53 of List I does not refer to natural gas separately. apex court has also read it only as part of mineral oil but for which Parliament would not have had power and competence to legislate. Various enactments such as Oil Fields (Regulation and Development) 1948, Mines Act, 1952, Mines and Minerals (Development and Regulation) Act, 1957, Petroleum and Natural Gases Rules, 1959, Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962, and Oil Industry Development Act, 1974, have been passed by Parliament. Since there was no explicit entry "Natural gas" in entry 53, all aforesaid legislations while referring to mineral oil had indicated explicitly, what is otherwise implicit that mineral oil includes natural gas. If natural gas is not part of term "mineral oil", Parliament could not have legislated in any manner on any issues relating to natural gas which position has been made explicit. 35.14 Sub-clause (iv) to section 80-IB(9) was introduced by Finance (No. 2) Act, 2009, with effect from April 1, 2010. Notes on Clauses to Finance Bill, 2008, and Finance (No. 2) Bill, 2009, actual amendments to section 80-IB(9) made through Finance Bill, 2008, and Finance (No. 2) Bill, 2009, along with statements laid on floor of Parliament by hon'ble Finance Minister while moving motion for consideration of Finance Bill, 2008, on this subject matter are reproduced below: Notes on Clauses to Finance Bill, 2008 (see [2008] 298 ITR (St.) 142, 153): "Clause 15 seeks to amend section 80-IB of Income-tax Act, which relates to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Sub-section (9) of said section provides for deduction in respect of profits and gains derived from commercial production or refining of mineral oil. term'mineral oil' does not include petroleum and natural gas, unlike other sections of Act. deduction under this sub-section is available to undertaking for period of seven consecutive assessment years including initial assessment year- (i) in which commercial production under production sharing contract has first started; or (ii) in which refining of mineral oil has begun. It is proposed to insert new proviso in sub-section (9) of section 80-IB so as to provide that no deduction under this sub-section shall be allowed to undertaking engaged in refining of mineral oil if it begins refining on or after April 1, 2009. This amendment will take effect from April 1, 2008." Amendment of section 80-IB in Finance Act, 2008 (see [2008] 300 ITR (St.) 17, 31): "18. In section 80-IB of Income-tax Act,- (a) In sub-section (9), after second proviso, following proviso shall be inserted, namely:- 'Provided also that where such undertaking begins refining of mineral oil on or after 1st day of April, 2009, no deduction under this section shall be allowed in respect of such undertaking unless such undertaking fulfils all following conditions, namely:- (i) It is wholly owned by public sector company or any other company in which public sector company or companies hold at least forty-nine per cent. of voting rights; (ii) It is notified by Central Government in this behalf on or before 31st day of May, 2008; and (iii) It begins refining not later than 31st day of March, 2012.'" 35.15 Statement of Finance Minister on floor of Parliament while moving motion for consideration of Finance Bill, 2008: "... Members are aware, this sub-section allows 100 per cent. tax exemption in respect of undertaking which begins commercial production or refining of mineral oil for period of seven consecutive assessment years. Now, what is scope of this section? It is disputed. Department has taken view; assessees have taken another view. disputes go back to assessment year 2001-02. disputes are under adjudication before different tax authorities. In my view, it is not correct to resolve these disputes by debate in Parliament We should allow disputes to be resolved in normal course by tax tribunals and courts. Nevertheless, some doubts have arisen because of notes on clauses attached to Finance Bill. I wish to clarify these doubts. statement in notes on clauses is mere restatement of Income-tax Department's known position before tribunals and courts which are adjudicating matter. Nothing new has been stated, it is simply restatement of Department's position which has already placed before tribunals and courts. Besides, it is well settled proposition of law that notes on clauses have no legal effect and are not binding on courts. I may assure potential bidders for oil exploration blocks that benefit of section 80-IB(9), as finally interpreted by courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding..." 35.16 Budget Speech of Finance Minister while introducing Finance (No. 2) Bill, 2009 (see [2009] 314 ITR (St.) 29, 51): "102. Madam Speaker, in context of geo-political environment, it is necessary for us to create our own faculties for energy security. Accordingly, I propose to extend tax holiday under section 80-IB(9) of Income-tax Act, which was hitherto available in respect of profits arising from commercial production or refining of mineral oil, also to natural gas. This tax benefit will be available to undertakings in respect of profits derived from commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under New Exploration Licensing Policy-VIII round of bidding. Further, I also propose to retrospectively amend provisions of said section to provide that'undertaking' for purposes of section 80-IB(9) will mean all blocks awarded in any single contract." 35.17 Notes on Clauses to Finance (No. 2) Bill, 2009 (see [2009] 314 ITR (St.) 126, 151): "Clause 37 of Bill seeks to amend section 80-IB of Incometax Act, which relates to deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Sub-section (9) of said section provides for deduction in respect of profits and gains derived from commercial production or refining of mineral oil subject to conditions stipulated in said sub-section. It is proposed to substitute said sub-section to provide that amount of deduction to undertaking shall be hundred per cent. of profits for period of seven consecutive assessment years, including initial assessment year, if such undertaking fulfils any of following:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st day of April, 1997 ; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st day of April, 1997 ; (iii) is engaged in refining of mineral oil and begins such refining on or after 1st day of October, 1998. It is further proposed to provide by way of Explanation that for purposes of claiming deduction under this sub-section, all blocks licensed under single contract which is, awarded under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O-19018/22/95- ONG.DO.VL dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'. This amendment will take effect retrospectively from April 1, 2000, and will, accordingly, apply in relation to assessment year 2000-01 and subsequent years. It is further proposed to amend clause (iii) of said sub-section (9) as so substituted to provide that benefit of deduction under said sub-section shall be available if undertaking is engaged in refining of mineral oil and begins such refining on or after 1st day of October, 1998, but not later than 31st day of March, 2012. This amendment will take effect retrospectively from April 1, 2009. It is also proposed to further amend said sub-section (9) as so substituted and further amended by inserting new clause (iv) to provide that benefit of deduction under said sub-section shall be available if undertaking is engaged in commercial production of natural gas in blocks licensed under eighth round of bidding for award of exploration contracts under New Exploration Licensing Policy announced by Government of India vide Resolution No. O19018/22/95-ONG.DO.VL, dated February 10, 1999 (hereinafter referred to as'NELP-VIII') and begins commercial production of natural gas on or after 1st day of April, 2009. This amendment will take effect from 1st April, 2010, and will, accordingly, apply in relation to assessment year 2010-11 and subsequent years." 35.18 Amendment to section 80-IB(9) by Finance (No. 2) Act, 2009 (see [2009] 315 ITR (St.) 60, 85): "37. In section 80-IB of Income-tax Act,- (a) for sub-section (9), following sub-section shall be substituted and shall be deemed to have been substituted with effect from 1st day of April, 2000, namely:- '(9) amount of deduction to undertaking shall be hundred per cent. of profits for period of seven consecutive assessment years, including of profits for period of seven consecutive assessment years, including initial assessment year, if such undertaking fulfils any of following, namely:- (i) is located in North-Eastern Region and has begun or begins commercial production of mineral oil before 1st day of April, 1997; (ii) is located in any part of India and has begun or begins commercial production of mineral oil on or after 1st day of April, 1997; (iii) is engaged in refining of mineral oil and begins such refining on or after 1st day of October, 1998. Explanation.-For purposes of claiming deduction under this sub- section, all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O19018/22/95-ONG.DO.VL, dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single "undertaking".'; (b) In sub-section (9), as so substituted,- (A) in clause (iii), after words, figures and letters "the 1st day of October, 1998", words, figures and letters "but not later than 31st day of March, 2012" shall be inserted; (B) after clause (iii), following clauses shall be inserted with effect from 1st day of April, 2010, namely:- (iv) is engaged in commercial production of natural gas in blocks licensed under eighth round of bidding for award of exploration contracts (hereafter referred to as "NELP-VIII") under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O-19018/22/95- ONG.DO.VL, dated February 10, 1999, and begins commercial production of natural gas on or after April 1, 2009. (v) is engaged in commercial production of natural gas in blocks licensed under fourth round of bidding for award of exploration contracts for coal bed methane blocks and begins commercial production of natural gas on or after April 1, 2009." 35.19 These amendments are not in nature of Validating Act and they have not been given retrospective effect. In fact, Notes on Clauses merely set out stand of Revenue authorities. This exercise is insufficient to construe that term "mineral oil" does not include natural gas or that benefits of section 80-IB have been extended to natural gas for first time with effect from April 1, 2009, by virtue of insertion of sub clause (iv) to section 80- IB(9). At best, sub-clause (iv) has to be construed to mean that benefit would also be available for NELP eighth bidders who satisfy conditions set out in said sub-clause. 35.20 In absence of specific wordings in statute, to draw conclusion that only undertakings engaged in commercial production of "mineral oil" other than "natural gas" will be entitled to deduction of profits and gains under above mentioned sub-section, is wholly incorrect. 35.21 For aforesaid reasons, we hold that insertion of subclause (iv) to section 80-IB(9) of Act by Finance (No. 2) Act, 2009, cannot be interpreted to mean that term "mineral oil" as used in section 80-IB does not include natural gas and cannot result in denial of benefit of deduction under section 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to eighth round of bidding. In view of decision of Constitutional Bench of apex court, term "mineral oil" includes and has always included "natural gas". Whether petitioner has any accrued or vested right? We may now consider third question as to whether petitioner has any accrued or vested right. One of fundamental principles of democratic society inherent in all provisions of Constitution is that any interference with property should be lawful. We are in era of globalisation. Deprivation of property may also cause serious concern in area of foreign investment, especially in context of international law and international investment agreements. Whenever foreign investor operates within territory of host country, investor and its properties are subject to legislative control of host country, along with international treaties or agreements. Even if foreign investor has no fundamental right, let them know, that rule of law prevails in this country. message should be loud and clear that rule of law exists in our country. 36.1 Income-tax Act, 1961, do not explicitly or impliedly forbid as to how company and Government should enter into agreements or contracts. In absence of contract, there is no vested interest which requires continuance of legislative policy, however, expressed in system of taxation. vested right is legal and enforceable right, enforceable by legal process. We propose to consider article 300A of Constitution of India which reads as under: "300A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law." Two words, "person" and "property" in article 300A are important. We may first consider meaning of word "person". expression "person" includes any entity, not necessarily human being, to which rights or duties may be attributed. In ordinary, popular and natural sense word "person" means "a specific individual human being". But, in law, word "person" has slightly different connotation and refers to any entity, which is recognised by law as having rights and duties of human being. Thus, word "person", in law, unless otherwise intended, refers not only to natural person (male or female human being) but also any legal person, i.e., entity that is recognised by law as having or capable of having rights and duties. Ramanlal Bhailal Patel v. State of Gujarat [2008] 5 SCC 449. word "person" includes corporation or company as well as natural person. Unless there is something to contrary, it ought to be held to include both. 36.1. expression "person" has been defined in section 2(31) of Income-tax Act, 1961, as under: "(31)'person' includes- (i) individual, (ii) Hindu undivided family, (iii) company, (iv) firm, (v) association of persons or body of individuals, whether incorporated or not, (vi) local authority, and (vii) every artificial juridical person, not falling within any of preceding sub-clauses." term "person" is not defined in Constitution. But article 367 of Constitution provides that definitions contained in section 3(42) of General Clauses Act, 1897, apply for interpretation of Constitution. definition of "person" in General Clauses Act would not restrict power of State Legislature to define "person" and adopt meaning different from or in excess of ordinary acceptation of word as is defined in General Clauses Act. 36.2 provision of General Clauses Act, 1897, which is applicable for interpretation of Constitution as provided for under article 367(1) itself restricts applicability of Act and makes such application subject to context as otherwise may require. Section 3 of General Clauses Act, 1897, itself says that unless there is anything repugnant in subject or context term "person" shall include any company or association or body of individuals, whether incorporated or not. Legislature is not denuded of its competency to define term "person" differently from definition of that term in General Clauses Act, 1897. It is not uncommon practice for Parliament or State Legislature to define "person" in Act and create artificial unit by fiction. definition of "person" in section 3(42) of General Clauses Act is undoubtedly illustrative and not exhaustive. well-known rule of interpretation regarding such inclusive definitions has always been to treat other entities, which would not otherwise have come strictly within definition, to be part thereof because of illustrative enactment of such definitions. Legislature is competent in its wisdom to define "person" separately for purposes of each of enactments and different from one in General Clauses Act and create artificial unit. definition of "person" in General Clauses Act would not operate as any fetter or restriction upon powers of State Legislature to define "person" and adopt meaning different from as defined in General Clauses Act. Karnataka Bank Ltd. v. State of Andhra Pradesh [2008] 12 VST 459 (SC); [2008] 2 SCC 254. 36.3 maxim reddendo singular singulis will apply to interpretation of word "person" so that general meaning of word "person" in its generic sense with its width would not be cut down by specific qualification of one species, i.e., natural "person" when it is capable to encompass in its ambit, natural persons, juristic persons and constitutional mechanism of governance in democratic set up. State, by Cabinet form of Government, is person ficta, corporate sole. Samatha v. State of A. P., AIR 1997 SC 3297. 36.4 expression "person" includes any entity, not necessarily human being, to which rights or duties may be attributed. Under Act, and article 300A expression "person" includes company, association of persons or body of individuals, whether incorporated or not and every artificial juridical person. Therefore, petitioners would be "person" covered under article 300A of Constitution. 36.5 apex court had occasion to consider as to what is accrued vested right in J. S. Yadav v. State of U. P. [2011] 6 SCC 570 in paragraphs 20 to 22 which is extracted as under: "20. word'vested' is defined in Black's Law Dictionary (sixth edition) at page 1563, as: vested; fixed; accrued; settled; absolute; complete. Having character or given rights of absolute ownership; not contingent; not subject to be defeated by condition precedent. Rights are 'vested' when right to enjoyment, present or prospective, has become property of some particular person or persons as present interest; mere expectancy of future benefits, or contingent interest in property founded on anticipated continuance of existing laws, does not constitute vested rights. In Webster's Comprehensive Dictionary (International edition) at page 1397,'vested' is defined as:' 'Law held by tenure subject to no contingency; complete; established by law as permanent right; vested interest.' 21. word'vest' is normally used where immediate fixed right in present or future enjoyment in respect of property is created. With long usage said word'vest' has also acquired meaning as'an absolute or indefeasible right'. It had a'legitimate' or 'settled expectation' to obtain right to enjoy property, etc., Such 'settled expectation' can be rendered impossible of fulfilment due to change in law by Legislature. Besides this, such a'settled expectation' or so-called'vested right' cannot be countenanced against public interest and convenience which are sought to be served by amendment of law... 22. Thus,'vested right' is right independent of any contingency. Such right can arise from contract, statute or by operation of law. vested right can be taken away only if law specifically or by necessary implication provide for such course." 36.6 word "property" has not been defined either under Act or article 300A of Constitution. According to Salmond's Jurisprudence, word "property" means legal rights of person of whatever description. 36.7 "Property", in legal sense, means aggregate of rights which are guaranteed and protected by law. It extends to every species of valuable right and interest, more particularly, ownership and exclusive right to thing, right to dispose of thing in every legal way, to possess it, to use it, and to exclude everyone else from interfering with it. dominion or indefinite right of use or disposition which one may lawfully exercise over particular things or subjects is called property. exclusive right of possessing, enjoying, and disposing of thing is property in legal parameters. Therefore, word'property' connotes everything which is subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has exchangeable value or which goes to make up wealth or estate or status. Property, therefore, within constitutional protection, denotes group of rights inhering citizen's relation to physical thing, as right to possess, use and dispose of it in accordance with law. In Ramanatha Aiyar's Law Lexicon, Reprint Edition 1987 at page 1031, it is stated that property is most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which party can have. term "property" has most extensive signification, and, according to its legal definition, consists in free use, enjoyment, and disposition by person of all his acquisitions, without any control or diminution, save only by laws of land. In Dwarkadas Srinivas' case, this court gave extended meaning to word "property". Mines, minerals and quarries are property attracting article 300A. Jilubhai Nanbhai Khachar v. State of Gujarat [1995] (Supp) (1) SCC 596. 36.8 "Property" is term of widest import and subject to any limitation, which context may require, it signifies every possible interest which person can clearly hold or enjoy. If property rights are taken away by Act are such that would render rights illusory and practically valueless than in effect and substance, property of person has been taken away by Act. Ahmed G. H. Ariff v. CWT [1969] 2 SCC 47; [1970] 76 ITR 471 (SC). 36.9 We may now examine as to whether petitioners have any vested right to property of which he is being deprived. demand for tax under invalid law would amount to deprivation of property. Coffee Board v. Joint CTO [1970] 25 STC 528 (SC); [1971] AIR 1971 SC 870. 36.10 apex court relying on Constitution Bench decision in Deokinandan Prasad v. State of Bihar, AIR 1971 SC 1409, held that benefit of pension which accrued to employee is in nature of "property" which cannot be taken away without due process of law as per provisions of article 300A of Constitution of India. State of Jharkhand v. Jitendra Kumar Srivastava, AIR 2013 SC 3383. 36.11 Right to receive pension under Service Rules for service rendered before retirement is "property" and subsequent reduction of pension would be "deprivation" of property within purview of article 300A. State of Kerala v. Padmanabhan Nair (M.), AIR 1985 SC 356. 36.12 Copyright is right to property and same can be acquired only on payment of compensation. Entertainment Network (India) P. Ltd. v. Super Cassette Industries Ltd. [2008] 13 SCC 30. 36.13 right to property under article 300A of Constitution of India is not fundamental right but it is Constitutional right. Legislature can deprive person of his property only by authority of law. Constitution Bench of apex court in K. T. Plantation (P.) Ltd. v. State of Karnataka [2011] 9 SCC 1, has held in paragraph 168 that article 300A proclaims that no person can be deprived of his property save by authority of law, meaning thereby that person cannot be deprived of his property merely by executive fiat, without any specific legal authority or without support of law made by competent legislature. expression "property" in article 300A confined not to land alone, it includes intangibles like copyrights and other intellectual property and embraces every possible interest recognised by law. 36.14 Similarly, valid contracts are property. But question is as to what extent person's rights will be protected when they are sought to be illegally deprived of their properties on strength of legislation. Accrued right or vested right is mature right which is capable of enforcement in law. Deprivation of property within meaning of article 300A, must take place for public purpose or public interest. Any law, which deprives person of his property has to be justified upon purpose and object of statute and policy of legislation otherwise it will be unlawful and unfair and undermines rule of law and can be subjected to judicial review. 36.15 Requirement of public purpose, for deprivation of person of his property under article 300A, is pre-condition. legislation providing for deprivation of property under article 300A must be "just, fair and reasonable" as understood in terms of article 14 of Constitution. 36.16 petitioners are carrying on business of mineral oil. When they entered into contract with Government they were enjoying seven years tax holiday on multiple undertakings in block. They were entitled to 100 per cent. exemption on their profits and gains under Act. They acquired vested right on their 100 per cent. exemption on their profits and gains which was property of petitioners. By amendment in Act they are being deprived of vested right of property by amending Act retrospectively. In our opinion, right given to petitioner for enjoying seven years tax holiday on each well/cluster of wells or on each undertaking in block was accrued and vested right which could not have been taken away expressly or by necessary implication. In view of section 6(c) of General Clauses Act, accrued and vested right of petitioner should have been preserved and could not be destroyed by impugned amendment by adding Explanation to section 80- IB(9) with retrospective effect. We do not find any material on record which may demonstrate that Parliament intended to destroy right, privilege or benefit enjoyed by petitioner under unamended section 80-IB(9) of Act without authority of valid law. 36.17 In J. S. Yadav (supra), apex court had held that "vested right" is right which can arise from contract, statute or by operation of law. vested right can be taken away only if law specifically or by necessary implication provide for such course. Thus, State cannot deprive any person, any corporation or company of his property, without following rule of law, violating article 300A of Constitution of India. Article 14 of Constitution of India Now, coming back to first question as to whether insertion of Explanation to section 80-IB(9) of Act by Finance (No. 2) Act, 2009, with retrospective effect from April 1, 2000, purporting to explain meaning of term "undertaking" is unconstitutional and ultra vires and offends article 14 of Constitution of India. Whether Explanation provide for fresh levy of tax? In other words, did Legislature in introducing impugned Explanation materially changed exemption which existed till such Explanation was introduced? If effect of Explanation is to withdraw existing deductions retrospectively, question of same being unreasonable or arbitrary and offending article 14 would arise. Article 14 of Constitution of India is reproduced as under: "14. Equality before law.-The State shall not deny to any person equality before law or equal protection of laws within territory of India." 37.1 petitioners are foreign and domestic companies. company or corporation, being not citizen, has no fundamental rights under article 19 of Constitution. None less companies would be entitled to claim protection of their rights under article 14 of Constitution. It would be relevant to examine whether respondents have committed breach of article 14 or any other Constitutional provision which may render Amendment Act ultra vires article 14 of Constitution of India. 37.2 power and competence of Parliament to amend any statutory provision with retrospective effect cannot be doubted. Any retrospective amendment to be valid must, however, be reasonable and not arbitrary and must not be violative of any of fundamental rights guaranteed under Constitution. mere fact that any statutory provision has been amended with retrospective effect does not by itself make amendment unreasonable. Unreasonableness or arbitrariness of any such amendment with retrospective effect has necessarily to be judged on merits of amendment in light of facts and circumstances under which such amendment is made. In considering question as to whether legislative power to amend provision with retrospective operation has been reasonably exercised or not it becomes relevant to enquire as to how retrospective effect of amendment operates. 37.3 Article 14 is part of basic structure of Constitution and, therefore, cannot be abrogated. apex court in State of Andhra Pradesh v. Mcdowell and Co. [1996] 3 SCC 709, observed that law made by Parliament or Legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence, and (2) violation of any of fundamental rights guaranteed in Part III of Constitution or of any other constitutional provision. There is no third ground. If enactment challenged as violative of article 14, it can be struck down only if it is found that it is violative of equality clause/equal protection clause enshrined therein. 37.4 If any law or amendment to law made by Parliament or Legislature overrides or is made in violation of fundamental rights or any other constitutional provision without sufficient objective and justification, court are empowered to declare law arbitrary and violative of article 14 of Constitution. Further, from scrutiny of law made by Parliament or Legislature, if court finds that law which is under challenge as ultra vires infringes rights or interests of petitioner, court can strike down enactment. 37.5 Where there is challenge to constitutional validity of law enacted by Legislature, court must keep in view that there is always presumption of constitutionality of enactment and clear transgression of constitutional principles must be shown. fundamental nature and importance of legislative process needs to be recognised by court and due regard and deference must be accorded to legislative process. Where legislation is sought to be challenged as being unconstitutional and violative of article 14 of Constitution, court must remind itself to principles relating to applicability of article 14 in relation to invalidation of legislation. two dimensions of article 14 in its application to legislation and rendering legislation invalid are now well recognised and these are (i) discrimination, based on impermissible or invalid classification, and (ii) excessive delegation of powers; conferment of uncanalised and unguided powers on executive, whether in form of delegated legislation or by way of conferment of authority to pass administrative orders-if such conferment is without any guidance, control or checks, it is violative of article 14 of Constitution. court also needs to be mindful that legislation does not become unconstitutional merely because there is another view or because another method may be considered to be as good or even more effective, like any issue of social, or even economic policy. It is well settled that courts do not substitute their views on what policy is. 37.6 Constitution Bench of apex court in Subramanian Swamy v. Director, Central Bureau of Investigation [2014] 8 SCC 682 after considering catena of decisions on article 14 has held in paragraphs 38 to 48 as under: "38 first part of article 14, which was adopted from Irish Constitution, is declaration of equality of civil rights of all persons within territories of India. It enshrines basic principle of republicanism. second part, which is corollary of first and is based on last clause of first section of fourteenth amendment of American Constitution, enjoins that equal protection shall be secured to all such persons in enjoyment of their rights and liberties without discrimination of favouritism. It is pledge of protection of equal laws, that is, laws that operate alike on all persons under like circumstances. 39. Article 14 of Constitution incorporates concept of equality and equal protection of laws. provisions of article 14 have engaged attention of this court from time to time. plethora of cases dealing with article 14 has culled out principles applicable to aspects which commonly arise under this article. Among those, may be mentioned, decisions of this court in Charanjit Lal Chowdhury, AIR 1951 SC 41; [1950] SCR 869, F. N. Balsara [1951] AIR 1951 SC 318; [1951] Cri LJ 1361; [1951] SCR 682, Anwar Ali Sarkar, AIR 1952 SC 75; [1952] Cri LJ 510; [1952] SCR 284, Kathi Raning Rawat, AIR 1952 SC 123; [1952] Cri LJ 805; [1952] SCR 435, Lachmandas Kewalram Ahuja, AIR 1952 SC 235; [1952] Cri LJ 1167; [1952] SCR 710, Syed Qasim Razvi, AIR 1953 SC 156; [1953] Cri LJ 862; [1953] SCR 589, Habeeb Mohamed, AIR 1953 SC 287; [1953] Cri LJ 1158; [1953] SCR 661, Kedar Nath Bajoria, AIR 1953 SC 404; [1953] Cri LJ 1621; [1954] SCR 30 and innovated to even associate members of this court to contribute their V. M. Syed Mohammad and Co., AIR 1954 SC 314; [1954] SCR 1117. most of above decisions were considered in Budhan Choudhry, AIR 1955 SC 191; [1955] Cri LJ 374 ; [1955] 1 SCR 1045. 40. This court exposited ambit and scope of article 14 in Budhan Choudhry as follows (SCC page 193, paragraph 5): '5... It is now well-established that while article 14 forbids class legislation, it does not forbid reasonable classification for purposes of legislation. In order, however, to pass test of permissible classification two conditions must be fulfilled, namely, (i) that classification must be founded on intelligible differentia which distinguishes persons or things that are grouped together from others left out of group, and (ii) that differentia must have rational relation to object sought to be achieved by statute in question. classification may be founded on different bases; namely, geographical, or according to objects or occupations or like. What is necessary is that there must be nexus between basis of classification and object of Act under consideration. It is also wellestablished by decisions of this court that article 14 condemns discrimination not only by substantive law but also by law of procedure.' 41. In Ram Krishna Dalmia, AIR 1958 SC 538; [1959] SCR 279, Constitution Bench of five-judges further culled out following principles enunciated in above cases (AIR pages 547-48, paragraph 11): '11....(a) that law may be constitutional even though it relates to single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as class by himself; (b) that there is always presumption in favour of constitutionality of enactment and burden is upon him who attacks it to show that there has been clear transgression of constitutional principles; (c) that it must be presumed that Legislature understands and correctly appreciates need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; (d) that Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where need is deemed to be clearest; (e) that in order to sustain presumption of constitutionality court may take into consideration matters of common knowledge, matters of common report, history of times and may assume every state of facts which can be conceived existing at time of legislation; and (f) that while good faith and knowledge of existing conditions on part of Legislature are to be presumed, if there is nothing on face of law part of Legislature are to be presumed, if there is nothing on face of law or surrounding circumstances brought to notice of court on which classification may reasonably be regarded as based, presumption of constitutionality cannot be carried to extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation.' 42. In Ram Krishna Dalmia, it was emphasised that (AIR page 548, paragraph 11): '11... above principles will have to be constantly borne in mind by court when it is called upon to adjudge constitutionality of any particular law attacked as discriminatory and violative of equal protection of laws.' 43. Having culled out above principles, Constitution Bench in Ram Krishna Dalmia, further observed that statute which may come up for consideration on question of its validity under article 14 of Constitution may be placed in one or other of following five classes (AIR pages 548-49, paragraph 12): '12... (i) statute may itself indicate persons or things to whom its provisions are intended to apply and basis of classification of such persons or things may appear on face of statute or may be gathered from surrounding circumstances known to or brought to notice of court. In determining validity or otherwise of such statute court has to examine whether such classification is or can be reasonably regarded as based upon some differentia which distinguishes such persons or things grouped together from those left out of group and whether such differentia has reasonable relation to object sought to be achieved by statute, no matter whether provisions of statute are intended to apply only to particular person or thing or only to certain class of persons or things. Where court finds that classification satisfies tests, court will uphold validity of law. (ii) statute may direct its provisions against one individual person or thing or to several individual persons or things but no reasonable basis of classification may appear on face of it or be deducible from surrounding circumstances, or matters of common knowledge. In such case court will strike down law as instance of naked discrimination... (iii) statute may not make any classification of persons or things for purpose of applying its provisions but may leave it to discretion of Government to select and classify persons or things to whom its provisions are to apply. In determining question of validity or otherwise of such statute court will not strike down law out of hand only because no classification appears on its face or because discretion is given to Government to make selection or classification but will go on to examine and ascertain if statute has laid down any principle or policy for guidance of exercise of discretion by Government in matter of selection or classification. After such scrutiny court will strike down statute if it does not lay down any principle or policy for guiding exercise of discretion by Government in matter of selection or classification, on ground that statute provides for delegation of arbitrary and uncontrolled power to Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, discrimination is inherent in statute itself. In such case court will strike down both law as well as executive action taken under such law... (iv) statute may not make classification of persons or things for purpose of applying its provisions and may leave it to discretion of Government to select and classify persons or things to whom its provisions are to apply but may at same time lay down policy or principle for guidance of exercise of discretion by Government in matter of such selection or classification... (v) statute may not make classification of persons or things to whom their provisions are intended to apply and leave it to discretion of Government to select or classify persons or things for applying those provisions according to policy or principle laid down by statute itself for guidance of exercise of discretion by Government in matter of such selection or classification. If Government in making selection or classification does not proceed on or follow such policy or principle... then in such case executive action but not statute should be condemned as unconstitutional.' 44. In Vithal Rao [1973] 1 SCC 500, five-judge Constitution Bench had occasion to consider test of reasonableness under article 14 of Constitution. It noted that (SCC page 506, paragraph 26): '26... State can make reasonable classification for purpose of legislation (and) that classification in order to be reasonable must satisfy two tests: (i) classification must be founded on intelligible differentia, and (ii) differentia must have rational relation with object sought to be achieved by legislation in question.' court emphasized that in this regard object itself should be lawful and it cannot be discriminatory. If object is to discriminate against one section of minority, discrimination cannot be justified on ground that there is reasonable classification because it has rational relation to object sought to be achieved. 45. constitutionality of Special Courts Bill, 1978, came up for consideration in Special Courts Bill, 1978, In re [1979] 1 SCC 380 as President of India made reference to this court under article 143(1) of Constitution for consideration of question whether the'Special Courts Bill' or any of its provisions, if enacted would be constitutionally invalid. seven- judge Constitution Bench dealt with scope of article 14 of Constitution. Noticing earlier decisions of this court in Budhan Choudhry, AIR 1955 SC 191, Ram Krishna Dalmia, AIR 1958 SC 538, C. I. Emden, AIR 1960 SC 548, Kangshari Haldar, AIR 1960 SC 457, Jyoti Pershad, AIR 1961 SC 1602 and Ambica Mills Ltd. [1974] 4 SCC 656, in majority judgment then Chief Justice Y. V. Chandrachud, inter alia, exposited following propositions relating to article 14: (Special Courts Bill, 1978, In re, SCC pages 424-26, paragraph 72): '(2) State, in exercise of its Governmental power, has of necessity to make laws operating differently on different groups or classes of persons within its territory to attain particular ends in giving effect to its policies, and it must possess for that purpose large powers of distinguishing and classifying persons or things to be subjected to such laws. (3) constitutional command to State to afford equal protection of its laws sets goal not attainable by invention and application of precise formula. Therefore, classification need not be constituted by exact or scientific exclusion or inclusion of persons or things. courts should not insist on delusive exactness or apply doctrinaire tests for determining validity of classification in any given case. Classification is justified if it is not palpably arbitrary. (4) principle underlying guarantee of article 14 is not that same rules of law should be applicable to all persons within Indian territory or that same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in same situation, and there should be no discrimination between one person and another if as regards subject-matter of legislation their position is substantially same. (5) By process of classification, State has power of determining who should be regarded as class for purposes of legislation and in relation to law enacted on particular subject. This power, no doubt, in some degree is likely to produce some inequality ; but if law deals with liberties of number of well-defined classes, it is not open to charge of denial of equal protection on ground that it has no application to other persons. Classification thus means segregation in classes which have systematic relation, usually found in common properties and characteristics. It postulates rational basis and does not mean herding together of certain persons and classes arbitrarily. (6) law can make and set apart classes according to needs and exigencies of society and as suggested by experience. It can recognise even degree of evil, but classification should never be arbitrary, artificial or evasive. (7) classification must not be arbitrary but must be rational, that is to say, it must not only be based on some qualities or characteristics which are to be found in all persons grouped together and not in others who are left out but those qualities or characteristics must have reasonable relation to object of legislation. In order to pass test, two conditions must be fulfilled, namely, (1) that classification must be founded on intelligible differentia which distinguishes those that are grouped together from others and (2) that that differentia must have rational relation to object sought to be achieved by Act. (8) differentia which is basis of classification and object of Act are distinct things and what is necessary is that there must be nexus between them. In short, while article 14 forbids class discrimination by conferring privileges or imposing liabilities upon persons arbitrarily selected out of large number of other persons similarly situated in relation to privileges sought to be conferred or liabilities proposed to be imposed, it does not forbid classification for purpose of legislation, provided such classification is not arbitrary in sense above mentioned. (9) If legislative policy is clear and definite and as effective method of carrying out that policy discretion is vested by statute upon body of administrators or officers to make selective application of law to certain classes or groups of persons, statute itself cannot be condemned as piece of discriminatory legislation. In such cases, power given to executive body would import duty on it to classify subject matter of legislation in accordance with objective indicated in statute. If administrative body proceeds to classify persons or things on basis which has no rational relation to objective of Legislature, its action can be annulled as offending against equal protection clause. On other hand, if statute itself does not disclose definite policy or objective and it confers authority on another to make selection at its pleasure, statute would be held on face of it to be discriminatory, irrespective of way in which it is applied. (10) Whether law conferring discretionary powers on administrative authority is constitutionally valid or not should not be determined on assumption that such authority will act in arbitrary manner in exercising discretion committed to it. Abuse of power given by law does occur; but validity of law cannot be contested because of such apprehension. Discretionary power is not necessarily discriminatory power. (11) Classification necessarily implies making of distinction or discrimination between persons classified and those who are not members of that class. It is essence of classification that upon class are cast duties and burdens different from those resting upon general public. Indeed, very idea of classification is that of inequality, so that it goes without saying that mere fact of inequality in no manner determines matter of constitutionality. (12) Whether enactment providing for special procedure for trial of certain offences is or is not discriminatory and violative of article 14 must be determined in each case as it arises, for, no general rule applicable to all cases can safely be laid down. practical assessment of operation of law in particular circumstances is necessary. (13) rule of procedure laid down by law comes as much within purview of article 14 as any rule of substantive law and it is necessary that all litigants, who are similarly situated, are able to avail themselves of same procedural rights for relief and for defence with like protection and without discrimination.' 46. In Nergesh Meerza [1981] 4 SCC 335, three-judge Bench of this court while dealing with constitutional validity of regulation 46(i)(c) of Air India Employees' Service Regulations (referred to as 'the A. I. Regulations') held that certain conditions mentioned in Regulations may not be violative of article 14 on ground of discrimination but if it is proved that conditions laid down are entirely unreasonable and absolutely arbitrary, then provisions will have to be struck down. With regard to due process clause in American Constitution and article 14 of our Constitution, this court referred to Anwar Ali Sarkar, AIR 1952 SC 75; [1952] Cri LJ 510; [1952] SCR 284, and observed that due process clause in American Constitution could not apply to our Constitution. court also referred to A. S. Krishna, AIR 1957 SC 297 wherein Venkatarama Ayyar J. observed (AIR page 303, paragraph 13) 'The law would thus appear to be based on due process clause, and it is extremely doubtful whether it can have application under our Constitution.' 47. In D. S. Nakara [1983] 1 SCC 305, Constitution Bench of this court had occasion to consider scope, content and meaning of article 14. court referred to earlier decisions of this court and in paragraph 15, court observed (SCC pages 317-18): '15. Thus fundamental principle is that article 14 forbids class legislation but permits reasonable classification for purpose of legislation which classification must satisfy twin tests of classification being founded on intelligible differentia which distinguishes persons or things that are grouped together from those that are left out of group and that differentia must have rational nexus to object sought to be achieved by statute in question.' 48. In E. P. Royappa [1974] 4 SCC 3, it has been held by this court that basic principle which informs both articles 14 and 16 are equality and inhibition against discrimination. This court observed in paragraph 85 as under (SCC page 38): '85... From positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to rule of law in republic while other, to whim and caprice of absolute monarch. Where act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of article 14, and if it affects any matter relating to public employment, it is also violative of article 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment.'" 37.7 apex court in Shimnit Utsch India P. Ltd. v. West Bengal Transport Infrastructure Development Corporation Ltd. [2010] 6 SCC 303 held in paragraph 52 that Government has discretion to adopt different policy or alter or change its policy calculated to serve public interest and make it more effective. Choice in balancing of pros and cons relevant to change in policy lies with authority. But like any discretion exercisable by Government or public authority, change in policy must be in conformity with Wednesbury reasonableness and free from arbitrariness, irrationality, bias and malice. 37.8 In democratic set up, it is for Legislature to decide what economic or social policy it should pursue or what administrative consideration it should bear in mind. It is well recognised that Parliament or Legislature has to be granted greater latitude in framing taxing statute. primary purpose of levy of all taxes is to raise funds for public good. Which person should be taxed, what transaction should be taxed or what goods should be taxed, depends upon social, economic and administrative considerations. power of taxation can be used not merely for raising revenue but also to regulate economy, to encourage social objectives of State. court should examine reasonableness of such provision particularly when same is brought into operation with retrospective effect. Section 80-IB(9) provides for deduction under certain circumstances. If such deductions are withdrawn with retrospective effect, surely there would be case of providing for tax which was till then not known. 37.9 When tax law or amendment made therein is impugned under article 14, court is to decide whether amendment in tax law is palpably so arbitrary or unreasonable that it must be struck down. word "arbitrary" is used in sense of being discriminatory. act which is discriminatory is liable to be labelled as arbitrary. 37.10 If from bare reading of provisions of Act or amended Act by which Explanation has been added to section 80-IB(9), it is clear that new tax is being levied with retrospective effect confers arbitrary, uncanalised, unbridled, unrestricted power without recording any reasons and without adhering to principles of equality as envisaged in article 14 of Constitution. Before coming to main question, we deem it necessary to state that India has already begun its process of globalisation by opening up world trade. We may call it liberalisation, privatisation and globalisation policy to ensure that India is in process of restructuring her economy, with expressions of elevating and speeding up her economic development, in which foreign direct investment is playing major role in rapid economic growth and we are on fast track to prosperity. For successful working of democracy and national economy, it is essential that public revenue be generated. In Reliance Natural Resources Ltd. v. Reliance Industries Ltd. [2010] 156 Comp Cas 455 (SC); [2010] 7 SCC 1, apex court observed that in constitutional democracy like ours, national assets belong to people. Government holds such natural resources in trust. constitutional mandate is that natural resources belong to people of this country. Government owns such assets for purposes of developing them in interests of people. natural resources are vested with Government as matter of trust in name of people of India. Thus, it is solemn duty of State to protect national interest. 39.1 Constitution envisages exploration, extraction and supply of mineral oil and gas to be within domain of Governmental functions. It is duty of Union to make sure that these resources are used for benefit of citizens of this country. Due to shortage of funds and technical know-how, Government has privatised such activities through mechanism provided under production sharing contract (PSC). Power to impose tax is essentially legislative function under article 265 of Constitution of India. Article 265 states that no tax shall be levied except by authority of law. In taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at language used. Income-tax Act, 1961, do not explicitly or impliedly forbid as to how company and Government should enter into agreements or contracts. In absence of contract, there is no vested interest which requires continuance of legislative policy, however, expressed in system of taxation. vested right is legal and enforceable right, enforceable by legal process. Liberal tax incentives for undertaking specific activities such exploration of mineral oil and gases could be granted by Government. Parliament or Legislature had taken adequate measure in framing genuine policy for exploring mineral oil and gases for purely commercial purpose in national interest by inviting parties internationally to make investments by offering tax holiday. genuine intention of Parliament or Legislature inviting investments has to be recognised and honoured. tax planning was legitimate and petroleum policy and provisions of Income-tax Act, 1961, were within framework of law. Government invited foreign company to India including domestic companies by issuing global tender by opening up foreign direct investment, in field of exploration of mineral oil and gases, under production sharing contract, where petitioner was to carry on exploration, development and production of mineral oil and natural gas. petitioner is subject to income-tax law in India. He has been awarded right to explore, develop and produce mineral oil in various blocks. For this purpose, petitioner has entered into production sharing contract (PSC) with Government of India for exploration, development and production of "mineral oil". production sharing contract specifies area over which petitioner has been given such rights. production sharing contract defines contract area as block. He has been producing crude oil and natural gas from Hazira and Surat blocks. He has been producing crude oil and natural gas from such blocks. He has been claiming benefit of deduction of 100 per cent. of profits and gains from production of mineral oil and natural gas under section 80-IB(9) as it stood prior to amendment to section 80-IB(9) of Act, which was introduced by Finance (No. 2) Act, 2009. In these proceedings, constitutional validity of amendment to sub-section (9) of section 80-IB of Act by Finance (No. 2) Act, 2009, has been challenged. After foreign investors entered India and apart from other sectors, they also participated in exploration, discovery and commercial production of mineral oil and gases, Finance Minister in his speech under pretext of clarification, added Explanation by laying down absolutely new proposition that all blocks under single contract would be treated as single undertaking. effect, it appears is devastating on investors. They have carried out commercial production of mineral oil under bona fide belief that each well/cluster of wells is undertaking and he enjoys benefit of 100 per cent. tax deduction for period of seven years on each well/cluster of wells which is undertaking and qualifies for tax deduction. amendment in section 80- IB(9) and addition of and Explanation was made by Legislature by Finance (No. 2) Act, 2009, which was given retrospective operation with effect from April 1, 2000, after petitioner had started commercial production and were entitled for 100 per cent. tax deduction on profits and gains. ownership of natural resources embedded in sea bed and ground vests in State and policy for exploitation of said resources was also as formulated by Central Government. In order that private sector companies are attracted to participate in exploration, development and production of hydrocarbons, NELP was notified by Central Government and it provided certain assurances to prospective participants. Under NELP, Central Government invited offers for exploration of mineral oil for every block and commenced process of entering into production sharing contract with successful bidders who is nomenclature as contractor under production sharing contract. Notice inviting offers under NELP, where under heading "Main features of terms offered", it was stated that "income-tax holiday" for seven years from start of commercial production" will be available and further that "To facilitate investors, Petroleum Tax Guide (PTG) is in place". gas basin comprises huge area and each basin may comprise number of blocks with delineated areas. Each block may have one or more gas or oil fields where hydrocarbons had been discovered. Every field may have one or more wells, depending on extent of mineral oil reserve driven by technical requirements. Once discovery is announced and declared to be "commercial discovery", elaborate process has been laid down in production sharing contract not only for approving it as commercial discovery but right down to number of wells which contractor was to drill. For this purpose, separate number of wells which contractor was to drill. For this purpose, separate development plan for development of each field is prepared by contractor and is approved by body known as management committee in which Government has veto power. Each of such wells/cluster of wells is separate and independent undertaking. Moreover, notice inviting offers and production sharing contract envisage exploration period, followed by development and production period. exploration period is maximum of seven years. While notice inviting offers envisaged production in phased manner, it is contradiction to state that period of seven years exemption for entire block, should commence from time when first well started commercial production. exploration, development and production, are phase-wise for every block and it would not be right to state that period of seven years for entire block would commence from date of commercial production in very first well, when other areas of block were still under exploration or development stage as stipulated in production sharing contract. term "undertaking", therefore, cannot be construed to mean entire block to reckon period of seven years of tax holiday. benefits of deductions under section 80-IA were expressly made available with effect from April 1, 1999, by amending then existing section 80-IA. Later on section 80-IB(9) was introduced to provide for such benefits. At all times benefit had been available to "undertaking". Neither section 80- IA, section 80-IB nor provisions of production sharing contract provided that "undertaking" would be construed as whole block. Central Government would closely scrutinise and approve every stage of exploration, development and production of mineral oil. It was pointed out that Central Government is not only in majority in managing committee under production sharing contract but also has veto power. In course of development of block and in some cases of field, development plans consisting of either single well/cluster of wells had been approved. Thus, Central Government has always been aware that there are more than one undertaking in each block, has acted on this premise in approving more than one commercial discovery in each development area of block and cannot now introduce by retrospective amendment, concept that entire block would be single undertaking, and that such amendment is liable to be struck down as unreasonable and arbitrary. Meaning of word "undertaking" before insertion of Explanation to section 80-IB(9) Before we advert to newly introduced Explanation to section 80-IB(9), it would be relevant to find out width and ambit of sub-clause (ii) to section 80- IB(9) before insertion of Explanation, which reads as under: "80-IB. (9) amount of deduction to undertaking shall be hundred per cent. of profits for period of seven consecutive assessment years, including initial assessment year if such undertaking fulfils any of following namely:- (ii) is located in any part of India and has begun or begins commercial production of mineral all on or after April 1, 1997." 49.1 Three conditions need to be satisfied cumulatively to derive benefit under section 80-IB(9). Firstly, undertaking should be located in any part of India. Secondly, it has begun or begins commercial production of mineral oil and, thirdly, on or after April 1, 1997. 49.2 In other words, one hundred per cent. of profits of undertaking on its commercial production of mineral oil would secure deduction of profits and gains for seven consecutive years from year of commencement of commercial production. Consequently, undertaking for purpose of section 80-IB(9) has to be understood as one engaged in commercial production of mineral oil. Neither of expressions, namely, "undertaking" or "commercial production" have been defined under section 80-IB of Act. apex court had defined and laid down test as to what would constitute "undertaking" in case of Textile Machinery Corporation Ltd. (supra). This was case relating to claim by assessee under section 15C of Indian Income-tax Act, 1922, and, vide paragraph 2, two questions were referred before High Court as follows (page 198 of 107 ITR): "(1) Whether, on facts and in circumstances of case, "(1) Whether, on facts and in circumstances of case, Tribunal was right in holding that steel foundry division was industrial undertaking to which section 15C of Indian Income-tax Act, 1922, was applied? (2) Whether, on facts and in circumstances of case, Tribunal was right in holding that jute mill division set up by assessee- company was industrial undertaking to which section 15C of Indian Income-tax Act, 1922, applied?" 49.3 It was contention of Revenue that setting up of separate unit to do something in course of pre-existing manufacturing process to aid production of same article as has been produced by pre-existing industrial undertaking would not amount to starting of new industrial undertaking. It was contended that production of articles in steel foundry and in jute mill division is only ancillary activity to main business of assessee and since articles produced in these two supplemental undertakings help in producing identical articles which has been end product of assessee's main business and provision cannot come to aid of assessee. 49.4 apex court laid out set of criteria as to what qualifies as undertaking. There must be substantial investment of fresh capital in order to enable earning of profits attributable to that new capital. It should yield additional profits attributable to new outlay of capital in distinct unit and this is heart of matter. 49.5 Expansion of existing business would not deprive benefit since every new creation in business is some kind of expansion or advancement. true test is not whether new industrial undertaking connotes expansion of existing business of assessee but whether it is new and identifiable undertaking separate and distinct from existing business. new undertaking must exist on its own as viable unit. new undertaking can exist even after cessation of principal business of assessee and vice versa. It does not matter whether new activity produces same commodity of old business or distinct marketable commodity or even commodities which may feed old business. What is relevant is that new undertaking must be integrated unit by itself capable of its own production. It would be new undertaking if there is no transfer of any asset from old business. If results achieved are commercially tangible and undertakings can be carried out separately without losing its identity in old business, it would constitute new undertaking. Maintenance of separate books of account and discernible profits would also aid conclusion. 49.6 In short, undertaking is one which on standalone basis is economically independent unit. As long as this test is satisfied, it is immaterial whether undertaking carries out same business or different business. Economically independent units doing same business would constitute separate undertakings. 49.7 Applying above law laid down by apex court, sole test is if unit is able to conduct or perform commercial production of mineral oil that unit would become undertaking irrespective of fact it is engaged in production of very same product, namely, mineral oil. 49.8 It is important to highlight that expression "undertaking" should not be equated or read as assessee. This is essential principle evolved by courts over period of time. assessee is entitled to have more than one undertaking and it can even carry on same business or distinct business. test is, undertaking economically independent and commercially carrying out activities as self-sustainable unit. 49.9 production sharing contract is sovereign contract entered into on behalf of President of India under article 299 of Constitution of India. petitioner in paragraph 13 of affidavit has brought on record methodology for development of oil and gas fields. perusal of same indicates that there are detailed activities for exploration and development of every oil field. First, seismic analysis is done, then exploratory wells are drilled following which appraisal wells are drilled. Once contractor believes that oil or natural gas has been struck, he shall give detailed commerciality plan to management committee. Once this is approved, development plan is prepared for field which contains detailed proposals for constructions, establishment and operations for all facilities and services or incidental to recovery, storage and transportation of mineral oil from proposed development area. Thereafter, on basis of approved plan, either one or multiple wells are drilled for exploiting reservoir. It is pertinent to note that there is development plan approved by management committee for every development area/field. 49.10 We now refer to production sharing contract dated July 17, 2001, entered into between petitioner and Government of India. Commercial production of mineral oil is possible only when management committee comprising petitioner and Government is able to declare commercial discovery. Article 1.19 defines commercial discovery to mean discovery of petroleum reserves which has been declared as commercial discovery in accordance with provisions of articles 10 and article 21. Article 1.20 defines "commercial production" means production of crude oil or condensate or natural gas or any combination of these from contract area (excluding production for testing purposes) and delivery of same at relevant delivery point under programme of regular production and sale. 49.11 Contract area is whole area under production sharing contract. commercial discovery when made from any part of contract area would qualify to become development area. Article 1.31 of production sharing contract defines "development area" means "part of contract area which encompasses one or more commercial discoveries and any additional area that may be required for proper development of such commercial discoveries and established as such in accordance with provisions of contract. Article 1.34 defines "development plan" means submitted by contractor for development of commercial discovery, which has been approved by management committee or Government pursuant to article 10 or article 21. 49.12 Article 1.37 defines "discovery" means finding during petroleum operations of deposit of petroleum not previously known to have existed which can be recovered at surface in flow measurable by conventional petroleum industry testing methods. Article 1.38 defines "discovery area" means that part of contract area about which based on discovery under results obtained from well or wells drilled in such part, contractor is of opinion that petroleum exists and is likely to be produced in commercial quantities. 49.13 Article 1.51 defines "gas field" means within contract area, natural gas reservoir or group of natural gas reservoirs within common geological structure or feature. Article 1.66 defines "oil field" means within contract area oil reservoir or group of oil reservoirs within common geological structure. Article 1.88 defines "well" means bore hole, made by drilling in course of petroleum operations but does not include seismic shot hole. 49.14 analysis of above definitions along with article 10 and article 21 would make following things clear: (i) There can be more than one discovery within contract area. (ii) There can be more than one discovery area within contract area which as defined will include well or wells drilled in such part of area. (iii) There can be more than one commercial discovery within contract area. (iv) Every area in which there is commercial discovery which has one or more reservoir is called as oil or gas fields or in other words development area. (v) There can be more than one development area or field within contract area. (vi) For every development area/field there has to be development plant which is approved by management committee comprising petitioner and Government. (vii) Every development area will have either one well or cluster of wells. 49.15 From above, it is clear that commercial production involves step by step process identified to every development area comprising well or cluster of wells. production sharing contract further obligates that investment, costs, work programme, budget and expenditure is separately identified for each such development area. Revenue streams are identifiable from mineral oil produced from each of development area/field. 49.16 Therefore, it is clear that commercial production in terms of section 80-IB(9)(ii) would arise when contractor proceeds to commercially produce mineral oil from each and every development area/field with standalone, independent, identified investment, costs, budgets and revenues. activities of commercial production of every development area/field qualifies as undertaking being standalone and economically independent unit in terms of principles laid out by apex court in Textile Machinery Corporation Ltd.'s case, followed without deviation by various courts subsequently. Accordingly, block or contract area can have more than one undertaking since it involves more than one commercial discovery, development area, development plan and execution of commercial production on independent standalone basis. 49.17 Explanation inserted by Finance (No. 2) Act, 2009, in section 80-IB(9) is reproduced below: "Explanation.-For purposes of claiming deduction under this sub- section, all blocks licensed under single contract, which has been awarded under New Exploration Licensing Policy announced by Government of India, vide Resolution No. O19018/22/95-ONG. DO. VL, dated February 10, 1999, or has been awarded in pursuance of any law for time being in force or has been awarded by Central or State Government in any other manner, shall be treated as single'undertaking'." expression "shall be treated as a'single' undertaking in Act by inserting Explanation would evidently bring to light fact that prior to insertion of Explanation, even Government was of view that each block can have more than one undertaking in view of various articles in production sharing contract as set out above. usage of expression "single" in Explanation would automatically give rise to legal inference of existence of multiple undertakings for same assessee within same contract area or block. Explanation proceeds to deem multiple undertakings as single undertaking with reference to block licensed. This is plain and simple meaning and interpretation one can extend to Explanation. 49.18 Section 80-IB(9)(ii) before insertion of Explanation had created substantive vested right in petitioner in deriving profits and seeking deductions for every undertaking comprised in each development area within contract area or block. No ambiguity or doubt could be imputed to section 80- IB(9)(ii) of Act. 49.19 In this backdrop, one has to now consider whether insertion of Explanation by Finance (No. 2) Act, 2009, with retrospective application from April 1, 2000, would be valid and sustainable in law. above analysis would indicate that though expression "undertaking" has not been defined under Act it has acquired well defined meaning through consistent judicial decisions commencing from Textile Machinery's case. expression "undertaking" is used in various provisions of Act, while conferring benefits under different schemes. It is clear that commercial production of mineral oil happens from every development area/field consisting of well or cluster of wells with development plan being approved for every development area/field thereby making every development area/field as independent economic unit. Every development area/field is thus "undertaking". petitioner placed on record decision of Income-tax Appellate Tribunal rendered in their own case for assessment year 2001-02. respondent contended that this matter is under challenge in appeals before High Court which are pending. This decision, however, has not been stayed. 49.20 Looking at whole conspectus, it is clear that term "undertaking" has acquired consistent statutory meaning. It is true that Legislature is entitled to depart from this meaning and can define it way it chooses to do so. While doing so, it has to resort to process known to and approved by law. Explanation introduced by Finance Act (No. 2) of 2009 is departure from settled interpretative meaning given by courts to expression "undertaking". Any departure, therefore, has to be through process of validation which has to be notwithstanding any law or decision. Explanation is not non obstante clause, notwithstanding any law or decision, it proceeds under presumption that existing ambiguity is sought to be clarified when, in reality, there is none. In fact, usage of expression "single" before term "undertaking" in Explanation evidences legal understanding that undertaking is not synonymous to assessee and assessee can have more than one undertaking doing same or distinct business as long as they are independent stand alone units. When clearly there can be separate commercial discoveries for every development area/field which may consists of one well or cluster of wells which makes each development area "undertaking" and this is as per production sharing contract (PSC) entered into between petitioner and Central Government, there does not exist any ambiguity under Act. 49.21 There is no ambiguity or doubt which needed to be explained by this Explanation, if uniform settled interpretation and meaning needs to be departed, amendments sought to be carried out, can only be through process of validation and not through insertion of Explanation which is not in nature of validation. Legislative intent for adding by Amendment Explanation to section 80-IB(9) For purpose of finding out legislative intent, it is necessary to examine reason for enacting section 80-IB(9) of Act and what was provision earlier. For gathering legislative intent to give retrospectively to Explanation added by amendment to section 80-IB(9) its apposite to find out reasons and whether they are reasonable and for this purpose, it will be necessary to take into account history of legislation or averment introduces tax which is substantive in nature under garb of adding definition which is clarificatory, declaratory, curative or makes "small repair" in Act. 50.1 In Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 (SC); [2002] 9 SCC 1, apex court examined object of introducing section 115J in Act. court relied on Budget Speech of then hon'ble Finance Minister of India made in Parliament while introducing said section. 50.2 In Union of India v. Martin Lottery Agencies Ltd. [2009] 24 VST 1 (SC); [2009] 12 SCC 209, apex court in paragraphs 36 to 39, 45, 50 to 52 held as under: "36... speech of hon'ble Finance Minister would have been relevant for purpose of opining as to whether court independently would have arrived at conclusion that organising lottery would amount to rendition of service but not otherwise. 37. As it is not possible for us to arrive at said conclusion, we have no other option but to hold that by inserting explanation appended to clause (19) of section 65 of Act new concept of imposition of tax has been brought in. Parliament may be entitled to do so. It would be entitled to raise legal fiction, but when new type of tax is introduced or new concept of tax is introduced so as to widen net, it, in our opinion, should not be construed to have retrospective operation on premise that it is clarificatory or declaratory in nature. 38. There cannot be any doubt whatsoever that speech of hon'ble Finance Minister in House of Parliament may be taken to be valid tool for interpretation of statute. It was so held in K. P. Varghese v. ITO [1981] 131 ITR 597 (SC); [1981] 4 SCC 173 at 184, in following terms (page 608): '8... Now, it is true that speeches made by Members of Legislature on floor of House when Bill for enacting statutory provision is being debated are inadmissible for purpose of interpreting statutory provision but speech made by Mover of Bill explaining reason for introduction of Bill can certainly be referred to for purpose of ascertaining mischief sought to be remedied by legislation and object and purpose for which legislation is enacted. This is in accord with recent trend in juristic thought not only in western countries but also in India that interpretation of statute being exercise in ascertainment of meaning, everything which is logically relevant should be admissible.' (See also CWT v. Yuvraj Amrinder Singh [1985] 156 ITR 525 (SC); [1985] 4 SCC 608.) 39. It is, however, also well settled that statute must be interpreted keeping in view words used in it. We must notice that in Virtual Soft Systems Ltd. v. CIT [2007] 289 ITR 83 (SC); [2007] 9 SCC 665, Bench of this court has held: '24. Section 271 of Act is penal provision and there are wellestablished principles for interpretation of such penal provision. Such provision has to be construed strictly and narrowly and not widely or with object and intention of Legislature.'... 45. We are also not unmindful of fact that said decision has been overruled in CIT v. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC); [2008] 9 SCC 622. bare perusal of said decision would, however, show that three-judge Bench of this court noticed that Act intended to make position explicit which otherwise was implicit. Bench went back to provisions of original Act to hold that clarification issued by Parliament was in tune with actual interpretation of original provision... 50. It is, therefore, evident that by reason of Explanation, substantive law may also be introduced. If substantive law is introduced, it will have no retrospective effect. notice issued to assessee by appellant has, thus, rightly been held to be liable to be set aside. 51. Subject to constitutionality of Act, in view of explanation appended to this [sic section 65(19)(ii) of Finance Act, 1994] we are of opinion that service tax, if any, would be payable only with effect from May, 2008, and not with retrospective effect. In case of this nature, court must be satisfied that Parliament did not intend to introduce substantive change in law. 52. As stated herein before, for aforementioned purpose, expressions like for removal of doubts are not conclusive. said expressions appear to have been used under assumption that organizing games of chance would be rendition of service. We are herein not concerned as to whether it was constitutionally permissible for Parliament to do so as we are not called upon to determine said question but for our purpose, it would be suffice to hold that explanation is not clarificatory or declaratory in nature." 50.3 briefly set out history of Government's policy and tax holidays in regard to production of mineral oil in country. (i) Prior to 1999, Government had policy with respect to exploration, development and production of mineral oil in country. When private participation was permitted for first time under extant policy. (ii) It was under this policy that petitioner entered into its first production sharing contract on September 23, 1994, with Government of India and benefit of deduction to undertaking engaged in commercial production of mineral oil in any part of India on or after 1st day of April, 1997, was first introduced by Finance Act, 1998, in section 80-IA of Income-tax Act, 1961. (iii) Government, in order to attract private investments in mineral oil sector, formulated New Exploration and Licensing Policy (NELP) which came to be notified in Official Gazette on February 10, 1999. Among other things, NELP stated that seven years tax holiday from date of commencement of commercial production would be available to contractors under NELP. NELP also stated that separate Petroleum Tax Guide would be in place to facilitate investors. 50.4 Statement of Finance Minister on floor of Parliament while moving motion for consideration of Finance Bill, 2008: "... Members are aware, this sub-section allows 100 per cent. tax exemption in respect of undertaking which begins commercial production or refining of mineral oil for period of seven consecutive assessment years. Now, what is scope of this section? It is disputed. Department has taken view; assessees have taken another view. disputes go back to assessment year 2001-02. disputes are under adjudication before different tax authorities. In my view, it is not correct to resolve these disputes by debate in Parliament. We should allow disputes to be resolved in normal course by tax tribunals and courts. Nevertheless, some doubts have arisen because of notes on clauses attached to Finance Bill. I wish to clarify these doubts. statement in notes on clauses is mere restatement of Income-tax Department's known position before tribunals and courts which are adjudicating matter. Nothing new has been stated, it is simply restatement of Department's position which has already placed before tribunals and courts. Besides, it is well settled proposition of law that notes on clauses have no legal effect and are not binding on courts. I may assure potential bidders for oil exploration blocks that benefit of section 80-IB(9), as finally interpreted by courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding..." 50.5 Finance Minister on floor of Parliament while moving motion for consideration of Finance Bill, 2008, stated that subsection allows 100 per cent. tax exemption in respect of undertaking which begins commercial production or refining of mineral oil for period of seven consecutive assessment years and he assured potential bidders for mineral oil exploration blocks that benefit of section 80-IB(9), as finally interpreted by courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding. 50.6 After Income-tax Appellate Tribunal held each well is separate undertaking entitled for seven years tax holiday on each well from date when commercial production begins and assessee was entitled to 100 per cent. tax deduction on profits and gains law was amended by Parliament with retrospective effect though Revenue had challenged judgment of Income-tax Appellate Tribunal before High Court in appeals which are still pending. Budget speech of Finance Minister while introducing Finance (No. 2) Bill, 2009 (see [2009] 314 ITR (St.) 29, 51): "102. Madam Speaker, in context of geo-political environment, it is necessary for us to create our own faculties for energy security. Accordingly, I propose to extend tax holiday under section 80-IB(9) of Income-tax Act, which was hitherto available in respect of profits arising from commercial production or refining of mineral oil, also to natural gas. This tax benefit will be available to undertakings in respect of profits derived from commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under New Exploration Licensing Policy-VIII round of bidding. Further, I also propose to retrospectively amend provisions of said section to provide that'undertaking' for purposes of section 80-IB(9) will mean all blocks awarded in any single contract." 50.7 legislative intent is clearly reflected in action of Legislature in adding Explanation to section 80-IB(9) by Finance (No. 2) Act, 2009, by way of amendment with retrospective effect. It is easily discernible that Legislature wanted to overcome decision of Income-tax Appellate Tribunal wherein it had been held each well is separate undertaking entitled for seven years tax holiday on each well. adding of Explanation to section 80-IB(9) with retrospective effect by amendment was aimed to charge income-tax from mineral oil contractors who were benefited by 100 per cent. tax holiday for seven years. 50.8 To attain welfare state is our constitutional goal as well, enshrined as one of its basic features, which runs through our Constitution. It is for this reason, specific provisions are made in Constitution, empowering Legislature to make laws for levy of taxes, including income-tax. rationale behind collection of taxes is that revenue generated therefrom shall be spent by Governments on various developmental and welfare schemes, among others. Explanation to section 80-IB(9) by Finance (No. 2) Act, 2009, by way of amendment with retrospective effect is clarificatory, declaratory, curative or makes "small repair" or substantive provision Constitutional Bench of apex court in CIT v. Vatika Township P. Ltd. [2014] 367 ITR 466 (SC); [2015] 1 SCC 1 has held that though Act consists of words printed on paper, it amounts to verbal communication by legislation. technique required to understand legislation is governed by various principles of interpretation of statutes. In paragraph 27, court observed of various rules guiding how legislation has to be interpreted, one established rule is that unless contrary intention appears, legislation is presumed not to be intended to have retrospective operation. idea behind rule is that current law should govern current activities. Law passed today cannot apply to events of past. If we do something today, we do it keeping in view law of today and in force and not tomorrow's backward adjustment of it. Our belief in nature of law is founded on bed rock that every human being is entitled to arrange his affairs by relying on existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre [1870] LR 6 QB 1, retrospective legislation is contrary to general principle that legislation by which conduct of mankind is to be regulated when introduced for first time to deal with future acts ought not to change character of past transactions carried on upon faith of then existing law. 51.1 We would also like to point out, for sake of completeness, that where benefit is conferred by legislation, rule against retrospective construction is different. If legislation confers benefit on some persons but without inflicting corresponding detriment on some other person or on public generally and where to confer such benefit appears to have been legislators object, then presumption would be that such legislation, giving it purposive construction, would warrant it to be given retrospective effect. This exactly is justification to treat procedural provisions as retrospective. In Government of India v. Indian Tobacco Association [2005] 5 RC 379; [2005] 7 SCC 396, doctrine of fairness was held to be relevant factor to construe statute conferring benefit, in context of it to be given retrospective operation. same doctrine of fairness, to hold that statute was retrospective in nature, was applied in case of Vijay v. State of Maharashtra [2006] 6 SCC 286. It was held that where law is enacted for benefit of community as whole, even in absence of provision statute may be held to be retrospective in nature. However, we are not confronted with any such situation here. 51.2 In such cases, retrospectively is attached to benefit persons in contradistinction to provision imposing some burden or liability where presumption attaches towards prospectivity. In instant case, proviso added to section 113 of Act is not beneficial to assessee. On contrary, it is provision which is onerous to assessee. Therefore, in case like this, we have to proceed with normal rule of presumption against retrospective operation. Thus, rule against retrospective operation is fundamental rule of law that no statute shall be construed to have retrospective operation unless such construction appears very clearly in terms of Act, or arises by necessary and distinct implication. Dogmatically framed, rule is no more than presumption and thus could be displaced by out weighing factors. 51.3 Let us sharpen discussion little more. We may note that under certain circumstances, particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labelled as "declaratory statutes". circumstances under which provision can be termed as "declaratory statutes" is explained by Justice G. P. Singh [Principles of Statutory Interpretation, 13th Edition 2012 published by Lexis Nexis Butterworths Wadhwa, Nagpur] in following manner: "Declaratory statutes". presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies and approved by Supreme Court: "For modern purposes declaratory Act may be defined as Act to remove doubts existing as to common law, or meaning or effect of any statute. Such Acts are usually held to be retrospective. usual reason for passing declaratory Act is to set aside what Parliament deems to have been judicial error, whether in statement of common law or in interpretation of statutes. Usually, if not invariably, such Act contains preamble, and also word "declared" as well as word "enacted". But use of words "it is declared" is not conclusive that Act is declaratory for these words may, at times, be used to introduced new rules of law and Act in latter case will only be amending law and will not necessarily be retrospective. In determining, therefore, nature of Act, regard must be had to substance rather than to form. If new Act is "to explain" earlier Act, it would be without object unless construed retrospective. explanatory Act is generally passed to supply obvious omission or to clear up doubts as to meaning of previous Act. It is well settled that if statute is curative or merely declaratory of previous law retrospective operation is generally intended. language "shall be deemed always to have meant" is declaratory and is in plain terms retrospective. In absence of clear words indicating that amending Act is declaratory, it would not be so construed when pre-amended provision was clear and unambiguous. amending Act may be purely clarificatory to clear meaning of provision of principal Act which was already implicit. clarificatory amendment of this nature will have retrospective effect and, therefore, if principal Act was existing law which Constitution came into force, amending Act also will be part of existing law". above summing up is factually based on judgments of this court as well as English decisions. 51.4 Constitution Bench of this court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas, AIR 1968 SC 1336; [1968] 3 SCR 623, while considering nature of amendment to section 29(2) of Bombay Rents, Hotel and Lodging House Rates Control Act, as amended by Gujarat Act 18 of 1965, observed as follows: "The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. power of High Court to entertain petition for exercising revisional jurisdiction was before amendment derived from section 115, Code of Civil Procedure, and Legislature has by amending Act attempted to explain meaning of that provision. explanatory Act is generally passed to supply obvious omission or to clear up doubts as to meaning of previous Act." 51.5 We would also like to reproduce hereunder following observations made by this court in case of Govinddas v. ITO [1976] 103 ITR 123 (SC); [1976] 1 SCC 906, while holding section 171(6) of Incometax Act to be prospective and inapplicable for any assessment year prior to 1st April, 1962, date on which Act came into force (page 132 of 103 ITR): "11. Now, it is well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless terms of statute expressly so provide or necessarily require it, retrospective operation should not be given to statute so as to take away or impair existing right or create new obligation or impose new liability otherwise than as regards matters of procedure. general rule as stated by Halsbury in Vol. 36 of Laws of England (third edition) and reiterated in several decisions of this court as well as English courts is that'all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective' and retrospective operation should not be given to statute so as to affect, alter or destroy existing right or create new liability or obligation unless that effect cannot be avoided without doing violence to language of enactment. If enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only." 51.6 In case of CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC); [1962] 1 SCR 788, this court held that as liability to pay tax is computed according to law in force at beginning of assessment year, i.e., first day of April, any change in law affecting tax liability after that date though made during currency of assessment year, unless specifically made retrospective, does not apply to assessment for that year. 51.7 At same time, it is also mandated that there cannot be imposition of any tax without authority of law. Such law has to be unambiguous and should prescribe liability to pay taxes in clear terms. If concerned provision of taxing statute is ambiguous and vague and is susceptible to two interpretations, interpretation which favours subjects, as against there Revenue, has to be preferred. This is well established principle of statutory interpretation, to help finding out as to whether particular category of assessees are to pay particular tax or not. No doubt, with application of this principle, courts make endeavour to find out intention of Legislature. At same time, this very principle is based on "fairness" doctrine as it lays down that if it is not very clear from provisions of Act as to whether particular tax is to be levied to particular class of persons or not, subject should not be fastened with any liability to pay tax. This principle also acts as balancing factor between two jurisprudential theories of justice- Libertarian theory on one hand and Kantian theory along with Egalitarian theory propounded by John Rawls on other hand. 51.8 Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of tax. In Billings v. U. S. [232 US 261, at page 265, 34 S.Ct. 421 (1914)], Supreme Court clearly acknowledged this basic and long standing rule of statutory construction: "Tax statutes... should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favour of citizen. Eidman v. Martinez, 184 U. S. 578, 583; United States v. Wigglesworth, 2 Story, 369, 374; Mutual Benefit Life Ins. Co. v. Herold, 198 F. 199, 201, affd 201 F. 918; Parkview Bldg. and Loan Assn. v. Herold, 203 F. 876, 880 ; Mutual Trust Co. v. Miller, 177 N.Y. 51, 57." 51.9 Again, in United States v. Merriam 263 U.S. 179, 44 S.Ct. 69 (1923)], Supreme Court clearly stated at pages 187-88: "On behalf of Government it is urged that taxation is practical matter and concerns itself with substance of thing upon which tax is imposed rather than with legal forms or expressions. But in statutes levying taxes literal meaning of words employed is most important, for such statutes are not to be extended by implication beyond clear import of language used. If words are doubtful, doubt must be resolved against Government and in favour of taxpayer. Gould v. Gould, 245 U.S. 151, 153." 51.10 As Lord Cairns said many years ago in Partington v. AttorneyGeneral [1869] LR 4 HL 100: "As I understand principle of all fiscal legislation it is this: If person sought to be taxed comes within letter of law he must be taxed, however great hardship may appear to judicial mind to be. On other hand, if Crown, seeking to recover tax, cannot bring subject within letter of law, subject is free, however apparently within spirit of law case might otherwise appear to be. 51.11 "Notes on Clauses" appended to Finance Bill, 2002, while proposing insertion of proviso categorically states that "this amendment will take effect from June 1, 2002". These become epigraphic words, when seen in contradistinction to other amendments specifically stating those to be clarificatory or retrospectively depicting clear intention of Legislature. It can be seen from same notes that few other amendments in Act were made by same Finance Act specifically making those amendments retrospectively. For example, clause 40 seeks to amend section 92F. Clause iii(a) of section 92F is amended "so as to clarify that activities mentioned in said clause include carrying out of any work in pursuance of contract". This amendment takes effect retrospectively from April 1, 2002. Various other amendments also take place retrospectively. Notes on Clauses show that Legislature is fully aware of 3 concepts: (i) prospective amendment with effect from fixed date; (ii) retrospective amendment with effect from fixed anterior date; and (iii) clarificatory amendments which are retrospective in nature. 51.12 Thus, it was conscious decision of Legislature, even when Legislature knew implication thereof and took note of reasons which led to insertion of proviso that amendment is to operate prospectively. Learned counsel appearing for assessees sagaciously contrasted aforesaid stipulation while effecting amendment in section 113 of Act, with various other provisions not only in same Finance Act but Finance Acts pertaining to other years where Legislature specifically provided such amendment to be either retrospective or clarificatory. In so far as amendment to section 113 is concerned, there is no such language used and on contrary, specific stipulation is added making provision effective from June 1, 2002. 51.13 Furthermore, amendment made to taxing statute can be said to be intended to remove "hardships" only of assessee, not of Department. On contrary, imposing retrospective levy on assessee would have caused undue hardship and for that reason Parliament specifically chose to make proviso effective from June 1, 2002. apex court in CIT v. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC); [2008] 9 SCC 622, in paragraph 6 held that penalty provision were already in existence and penalty was not imposed for first time. amendment by Finance Act as specifically noted in Notes on Clauses makes position clear that amendment was clarificatory in nature and would apply to all assessments even prior to assessment year 2003-04. apex court further held in paragraph 8 that even if statute does contain statement to effect that amendment is clarificatory or declaratory, that is not end of matter. court has to analyse nature of amendment to come to conclusion whether it is in reality clarificatory or declaratory provision. Therefore, date from which amendment is made operative does not conclusively decide question. court has to examine scheme of statute prior to amendment and subsequent to amendment to determine whether amendment is clarificatory or substantive. apex court in paragraph 20 relied on decision in Zile Singh v. State of Haryana [2004] 8 SCC 1 with approval that it is cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation. But rule in general is applicable where object of statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in statute sufficient to show intention of Legislature to affect existing rights, it is deemed to be prospective only -nova constitutio futuris formam imponere debet non praeteritis new law ought to regulate what is to follow, not past. apex court in Martin Lottery Agencies Ltd. (supra), in paragraphs 19 and 36 held as under: "19. When Explanation seeks to give artificial meaning earned in India and bring about change effectively in existing law and in addition is stated to come into force with effect from future date, there is no principle of interpretation which would justify reading Explanation as operating retrospectively. 36. It is, therefore, evident that by reason of explanation, substantive law may also be introduced. If substantive law is introduced, it will have no retrospective effect." petitioner has been claiming well or cluster of wells each as separate undertaking and, according to him, in block, there may be various fields and various undertakings and each undertaking had been granted benefit of deductions under benefits of deduction under section 80-IA were expressly made available with effect from April 1, 1999 by amending then existing section 80-IA. Later on section 80-IB(9) was introduced to provide for such benefits. argument of learned counsel for respondent, if accepted, would be contrary to legislative intent as seven years tax holiday was provided by inviting public private participation contract as huge expenditure was involved in exploration, discovery and commercial production of mineral oil. benefit of 100 per cent. deduction on profits and gains was granted by Legislature under Act to invite investment and encourage mineral oil exploration, discovery and commercial production. Legislature gave clear message to foreign and domestic investors that State is encouraging mineral oil and gases exploration and commercial production by granting seven years tax holiday to undertaking. We propose to test argument of learned counsel for respondent. It is not disputed that benefit of seven years tax holiday was available to petitioner and is still available to petitioner. question is as to whether benefits of tax holiday of seven years was available on each undertaking which has now been taken away by amendment made in section 80-IB(9) by adding Explanation that provides that all blocks licensed under single contract shall be treated as single undertaking. production sharing contract provides period of four years for exploration of mineral oil, etc. argument of learned counsel for respondent is that moment first well starts commercial production of mineral oil, clock of seven year tax holiday starts ticking and even if Page 23 of 24 VST. other wells may have been explored or discovered or started commercial production after two, three or about end of four years period, petitioner would be entitled only to limited part of tax holiday which may be three or four years which may be available when commercial production starts in well, as period of seven years tax holiday has to be counted from date first well started commercial production. argument of learned counsel for respondent cannot be accepted. If we take example that block consists of 200 square kms., wherein exploration, discovery and commercial production has to be commenced by petitioner within period of four years. If he discovers well, wherein commercial production can be commenced within period of three months or six months from date he started exploration, then whether he should wait and continue to make investment on exploration and discovery of mineral oil in entire stretch of 200 square kms. and start commercial production of all wells together so that all well/ cluster of wells start commercial production on same day so that he may avail of tax holiday of seven years on all wells/cluster of wells by making huge investments in machines manpower etc. But this was not mentioned either in production sharing contract or in petroleum tax guide. object of amendment, as it appears from statements of Finance Minister while moving Finance (No. 2) Bill, 2009, was to define term "undertaking" in context of mineral oil which was subject matter of considerable dispute. assessees who are claiming every well in block licensed constitutes single undertaking entitled for tax holiday separately for each well. According to Finance Minister, view taken by assessee were against legislative intent. What was legislative intent when 100 per cent. tax deduction on profits and gains was granted by Legislature was neither stated nor explained by Finance Minister. expression "legislative intent" was used by Finance Minister in Bill to impose income-tax on petitioner by withdrawing tax holiday which was vested in petitioner from earlier point of time. Under garb of clarification or defining term "undertaking", Finance Minister by amendment almost withdrew benefit of tax deduction substantially. statement of Finance Minister further stated that term "undertaking" has been subject matter of considerable dispute. Finance Minister had clearly expressed legislative intent while presenting Finance Bill, 2008, in Parliament. "The legislative intent is clear from speech of Finance Minister on floor of Parliament while moving motion for consideration of Finance Bill, 2008, he clearly stated that sub-section allows 100 per cent. tax exemption in respect of undertaking which begins commercial production or refining of mineral oil for period of seven consecutive assessment years" "... In my view, it is not correct to resolve these disputes by debate in Parliament. We should allow disputes to be resolved in normal course by tax tribunals and courts." "... I may assure potential bidders for oil exploration blocks that benefit of section 80-IB(9), as finally interpreted by courts, will be applicable to all exploration and production contracts, whether obtained through nomination or bidding". From facts of case in hand, it is clear that judgment of Income-tax Appellate Tribunal was against Revenue as Income-tax Appellate Tribunal had found that each well/cluster of wells was separate undertaking entitled to seven years tax holiday. Revenue had challenged decision of Income-tax Appellate Tribunal Revenue had challenged decision of Income-tax Appellate Tribunal before High Court and, thereafter, they have remedy before apex court. But, arbitrarily, 100 per cent. tax deduction benefit could not be withdrawn by Finance Minister or Legislature by amending section 80-IB(9) of Act retrospectively from anterior date. amendment in such cases where already benefit had accrued and vested in assessee could not be taken away by giving retrospective amendment to section 80-IB(9) which is nothing but substantive provision inserted by amendment and it can only operate prospectively and not retrospectively. Constitutional Bench of apex court in Vatika Township P. Ltd. (supra) has held in paragraph 34 that it would also be pertinent to mention that assessment creates vested right and assessee cannot be subjected to reassessment unless provision to that effect inserted by amendment is either expressly or by necessary implication retrospective (see CED v. M. A. Merchant [1989] 177 ITR 490 (SC); [1989] Supp (1) SCC 499). apex court in Gold Coin Health Food Pvt. Ltd. (supra), held in paragraph 8 that even if statute does contain statement to effect that amendment is clarificatory or declaratory, that is not end of matter. court has to analyse nature of amendment to come to conclusion whether it is in reality clarificatory or declaratory provision. Therefore, date from which amendment is made operative does not conclusively decide question. court has to examine scheme of statute prior to amendment and subsequent to amendment to determine whether amendment is clarificatory or substantive. same principle would apply where Legislature had made statement in statute that it would apply retrospectively. We have examined history of enactment for mineral oil, old and amended provisions. We are satisfied that Explanation added to section 80-IB(9) has levied income-tax on all wells/cluster of wells and all undertakings, except first one which commences commercial production for which still seven years tax holiday is available. Legislature or Parliament had by inserting Explanation had widened main section 80-IB(9) and imposed altogether new tax by widening tax net which would be applicable for different periods depending upon date of starting commercial production would be substantive change in law with different tax liability. Such substantive provision could only be construed prospective in operation. For reasons given above, we are of considered opinion that amendment made in section 80-IB(9) by adding Explanation was not clarificatory, declaratory, curative or made "small repair" in Act but on contrary takes away accrued and vested right of petitioner which had matured after judgments of Income-tax Appellate Tribunal, therefore, Explanation added by Finance (No. 2) Act, 2009, was substantive law. We have no hesitation to hold that Explanation added to section 80-IB(9) by Finance Act (No. 2) of 2009 is clearly unconstitutional, violative of article 14 of Constitution of India and is liable to be struck down. Therefore, for reasons given above, we are of considered opinion that Explanation added to section 80-IB(9) by amendment is substantive law and could not apply retrospectively. Explanation added to section 80- IB(9) breaches rule of law and is arbitrary being violative of article 14 of Constitution of India is struck down. In result, both writ petitions succeed and are allowed. Explanation to section 80-IB(9) of Act is held to be ultra vires to article 14 of Constitution of India. Rule is made absolute. Parties to bear their own costs. After this judgment was pronounced, Mr. Mihir Joshi, learned senior counsel assisted by Mr. Nitin Mehta and Mr. Sudhir Mehta, learned counsel appearing for respondent No. 2 as well as Mr. Shakeel A. Qureshi have prayed that operation of this judgment be stayed for period of one month. We do not find any justification to stay our judgment. oral request made by learned counsel for respondents is rejected. *** Niko Resources Ltd. v. Union of India