Section 44BB of the Income Tax Act
Income-tax Act, 2025: s.61
Section 44BB of the Income-tax Act, 1961 corresponds to section 61 (Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents) of the Income-tax Act, 2025.
Read section 61 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 44BB is ONGC v. CIT (376 ITR 306), cited in 241 of the 388 judgments on BharatTax that turn on this section.
Leading authorities on Section 44BB
Income derived by a non-resident for services related to mineral oil operations, falling under the presumptive taxation regime of Section 44BB, cannot simultaneously be treated as fees for technical services under Section 9(1)(vii). The specific presumptive provisions override the general FTS definition, particularly when DTAA applies.
For computing presumptive income under Section 44BB, gross receipts do not include service tax reimbursements received from a client (like ONGC) if such amounts are not payments for services or plant/machinery directly used in the prospecting, extraction, or production of mineral oils.
Service tax paid to the Government of India is not 'on account of' the provision of services for mineral oil exploration and production, and thus does not form part of the aggregate taxable amount under Section 44BB(2)(a) and (b).
For transfer pricing purposes, distinct international transactions, such as royalty payments and manufacturing, should be benchmarked separately rather than aggregated. The selection of comparables must be based on a thorough Functions, Assets, and Risks (FAR) analysis, and loss-making entities are not automatically excluded if they satisfy other comparability criteria.
For computing profits under the presumptive taxation scheme of section 44BB, gross revenue excludes service tax collected and deposited by the assessee but includes mobilization/demobilization fees for offshore services.
If the income attributable to a Permanent Establishment (PE) in India is less than the remuneration paid to a dependent agent, the assessment is extinguished and no further computation of income is required.
Section 44BB, which provides for presumptive taxation of profits and gains of business in the case of exploration of mineral oils, does not override the provisions of Sections 5, 9, or 90 of the Income-tax Act, 1961. For business profits to be taxed in India, the existence of a Permanent Establishment (PE) in India must be established by the Revenue.
For the purpose of computing presumptive income under Section 44BB(2), 'gross receipts' do not include service tax collected by the assessee and paid to the government, as it does not represent an amount paid to the assessee for services rendered in connection with mineral oil extraction.
