Section 44BB of Income Tax Act

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SECTION 44BB OF INCOME TAX ACT- PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION ETC. OF MINERAL OILS 

Section 44BB  of Income Tax Act, covers taxation of non-residents engaged in the business of exploration, etc., of mineral oil . Lets discuss such provision in details as under : –

A. ELIGIBLE ASSESSEE UNDER SECTION 44BB: –

Presumptive provisions are applicable for non-resident engaged in –

• Providing services and facilities in connection with prospecting for mineral oil or extraction or production of mineral oil. or
• Supplying plant and machinery on hire which is used or to be used in prospecting for mineral oil or extraction or production of mineral oil

B. PRESUMPTIVE TAX RATE UNDER SECTION 44BB: –
The profits and gains shall be deemed to be 10% of the following : –
a) Amounts paid or payable to the taxpayer or to any person on his behalf whether in India or outside India, on account of the provision of such services
or facilities or supply of plant & machinery for the aforesaid purposes in India; and

b) Amounts received or deemed to be received in India by the taxpayer or any other person on his behalf on account of the provision of such services or facilities or supply of plant & machinery for the aforesaid purposes outside India.

 

NON-APPLICABILITY OF SECTION 44BB of INCOME TAX ACT 
The provisions of section 44BB shall not apply to incomes covered under sections 42, 44DA, 115A and Section 293A .

EXAMPLE : –

Kalaari Limited was engaged in exploration of oil during FY 2016-17 for which it availed technical services from FCO, which are covered and taxable at 10% under Section 115A. Whether FCO can opt for presumptive taxation Scheme of Section 44BB of Income Tax Act ?

SOLUTION : –

Technical services taxable under Section 115A are specifically excluded from purview of Section 44BB. Thus, FCO cannot opt for presumptive taxation scheme of Section 44BB.

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