COMPUTATION OF TOTAL INCOMECentral

Section 44BB of The Income Tax Act 1961

exploration, etc., of mineral oils.—(1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, ⁴[in the case of an assessee, being a non-resident,] engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”:

Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or ⁵[section 44DA or] section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections.

(2)The amounts referred to in sub-section (1) shall be the following, namely:—
1. (a)the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and
2. (b)the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. ⁶[(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.] Explanation.—For the purposes of this section,—
  1. (i)“plant” includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business;
  2. (ii)“mineral oil” includes petroleum and natural gas.]

↩1.Ins. by Act 25 of 1975, s. 8 (w.e.f. 1-4-1976).

↩2.Ins. by Act 26 of 1997, s. 15 (w.e.f. 1-4-1976).

↩3.Ins. by Act 11 of 1987, s. 11 (w.e.f. 1-4-1983).

↩4.Subs. by Act 26 of 1988, s. 16, for “in the case of an assessee” (w.e.f. 1-4-1983).

↩5.Ins. by Act 14 of 2010, s. 16 (w.e.f. 1-4-2011).

↩6.Ins. by Act 32 of 2003, s. 25 (w.e.f. 1-4-2004).

Summary

exploration, etc., of mineral oils., (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, 4[in the case of an assessee, being a non-resident] engaged in the business of providing services or facilities in connection with, or supplying plant and.

Practical examples

1A Canadian company provides specialized deep-sea drilling equipment to an Indian firm exploring for oil in the ocean. Instead of calculating complex expenses, Section 44BB allows the Canadian company to pay tax on a simple profit of 10% of their total rental income.

2A non-resident technician is hired to provide "services and facilities" at an oil extraction site in India. Under Section 44BB, his profit from this work is fixed at 10% of his fees, provided his income isn't already covered by other specific royalty or technical fee rules.

FAQ

1. What activities are covered under Section 44BB of The Income Tax Act 1961?

Section 44BB of the Income Tax Act covers providing services or facilities, or hiring out plant and machinery, for the prospecting, extraction, or production of mineral oils.

2. Does "plant" include ships under Section 44BB of The Income Tax Act 1961?

Yes, the explanation in Section 44BB of the Income Tax Act defines "plant" to include ships, aircraft, vehicles, drilling units, and scientific equipment used in the business.

3. Can Section 44BB of The Income Tax Act 1961 be used for royalties?

No, Section 44BB of the Income Tax Act does not apply if the income is already covered by rules for royalties or technical services under sections like 44DA or 115A.

Test yourself

Q1.Under Section 44BB of The Income Tax Act 1961, what is the fixed profit rate for non-residents in the mineral oil business?

Q2.How does Section 9 of The Income Tax Act 1961 refer to Section 44BB regarding equipment?

Q3.Which of these is NOT listed as "plant" in the explanation of Section 44BB of The Income Tax Act 1961?

Q4.Can a non-resident claim lower profits than the 10% mentioned in Section 44BB of The Income Tax Act 1961?

44BPreviousSection 44B Special provision for computing profits and gains of shipping business in the case of 44BBANextSection 44BBA Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents.

←Section 44B Section 44BBA→