Our foreign airline made a loss on its India operations and our books are audited. The Assessing Officer says 5 per cent of our gross collections is taxable under section 44BBA regardless. Is there any provision letting us claim the lower figure?
Not in section 44BBA itself. Section 44BBA(1) deems 5 per cent of the aggregate of the sub-section (2) amounts to be the profits of a non-resident engaged in the business of operation of aircraft, notwithstanding sections 28 to 43A, and the section as printed contains only two sub-sections: there is no counterpart to s.44BB(3) or s.44BBB(2), which is what lets a mineral-oil contractor or a turnkey power contractor claim lower profits on audited books. Sub-section (2) takes in (a) the amount paid or payable, whether in or out of India, on account of carriage of passengers, livestock, mail or goods FROM any place in India, and (b) the amount received or deemed to be received in India on account of such carriage FROM any place outside India.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 1988-04-01, reported as Income-tax Act, 1961, s.44BBA, as printed on the departmental Year 2009 and Year 2000 pages; inserted by the Finance Act, 1987 with effect from 1 April 1988 per the footnote on those pages. It bears on section 44BBA, section 44BBA(1), section 44BBA(2), section 44B, section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961, in Presumptive Taxation & Audit, Assessment & Scrutiny and How Tax Law Is Read matters.
Three points repay attention. First, the missing lower-profit option is the whole commercial significance of this section: a non-resident airline that is loss-making on its Indian traffic has no statutory route inside s.44BBA to displace the 5 per cent, and the argument has to be pitched either on the section not applying at all — the assessee is not "engaged in the business of operation of aircraft" — or on a treaty. The library already holds Caribjet Inc. v. DCIT on the first of those, holding that a wet lease is not operation of aircraft. Second, the connecting factor is different from the shipping sections and the difference is in the words: s.44B and s.172 speak of goods "shipped at a port in India", whereas s.44BBA speaks of carriage "from any place in India". "Place", not "port" — the aircraft section is not confined to gateway airports in the way a literal reading of the shipping sections might suggest. Third, the asymmetry between clause (a) and clause (b) is the same as in s.44B: for carriage from India the amount is taken whether paid in or out of India; for carriage from outside India only what is received or deemed received in India is taken. The percentage differs from the shipping figure — five per cent, not seven and a half — and the clauses are lettered (a) and (b) here where s.44B letters them (i) and (ii); do not carry a citation across from one section to the other.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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As printed on the Year 2009 departmental page, section 44BBA reads: "44BBA. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to five 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\". (2) The amounts referred to in sub-section (1) shall be the following, namely:— (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 carriage of passengers, livestock, mail or goods from any place in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India." The Year 2000 page prints the same words. Neither page prints any sub-section (3), and neither prints any proviso permitting the assessee to claim lower profits on audited books.
For a non-resident engaged in the business of operation of aircraft, 5 per cent of the aggregate of the s.44BBA(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate takes in amounts paid or payable in or out of India for carriage from any place in India, and only amounts received or deemed to be received in India for carriage from any place outside India. As printed on the two departmental editions read this pass, the section contains no mechanism by which lower profits may be claimed on audited books.
Not applicable — this is a statement of statutory text taken from two departmental editions. No judicial reasoning is involved. The comparison with s.44BB(3) and s.44BBB(2) is a comparison of statutory texts separately transcribed for the companion entries in this batch.
44BBA. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to five 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".
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Handle my notice → Ask a CA on WhatsAppNot in section 44BBA itself. Section 44BBA(1) deems 5 per cent of the aggregate of the sub-section (2) amounts to be the profits of a non-resident engaged in the business of operation of aircraft, notwithstanding sections 28 to 43A, and the section as printed contains only two sub-sections: there is no counterpart to s.44BB(3) or s.44BBB(2), which is what lets a mineral-oil contractor or a turnkey power contractor claim lower profits on audited books. Sub-section (2) takes in (a) the amount paid or payable, whether in or out of India, on account of carriage of passengers, livestock, mail or goods FROM any place in India, and (b) the amount received or deemed to be received in India on account of such carriage FROM any place outside India. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 44BBA, section 44BBA(1), section 44BBA(2), section 44B, section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.44BBA, as printed on the departmental Year 2009 and Year 2000 pages; inserted by the Finance Act, 1987 with effect from 1 April 1988 per the footnote on those pages. Three points repay attention. First, the missing lower-profit option is the whole commercial significance of this section: a non-resident airline that is loss-making on its Indian traffic has no statutory route inside s.44BBA to displace the 5 per cent, and the argument has to be pitched either on the section not applying at all — the assessee is not "engaged in the business of operation of aircraft" — or on a treaty. The library already holds Caribjet Inc. v. DCIT on the first of those, holding that a wet lease is not operation of aircraft. Second, the connecting factor is different from the shipping sections and the difference is in the words: s.44B and s.172 speak of goods "shipped at a port in India", whereas s.44BBA speaks of carriage "from any place in India". "Place", not "port" — the aircraft section is not confined to gateway airports in the way a literal reading of the shipping sections might suggest. Third, the asymmetry between clause (a) and clause (b) is the same as in s.44B: for carriage from India the amount is taken whether paid in or out of India; for carriage from outside India only what is received or deemed received in India is taken. The percentage differs from the shipping figure — five per cent, not seven and a half — and the clauses are lettered (a) and (b) here where s.44B letters them (i) and (ii); do not carry a citation across from one section to the other. If it applies to you, the first step is this: Establish first whether the client is "engaged in the business of operation of aircraft" at all. If it is not — for instance where the aircraft is provided to another carrier rather than operated — s.44BBA does not apply and the ordinary provisions do.
As printed on the Year 2009 departmental page, section 44BBA reads: "44BBA. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to five 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\". (2) The amounts referred to in sub-section (1) shall be the following, namely:— (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 carriage of passengers, livestock, mail or goods from any place in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India." The Year 2000 page prints the same words. Neither page prints any sub-section (3), and neither prints any proviso permitting the assessee to claim lower profits on audited books. The matter was decided on 1988-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. For a non-resident engaged in the business of operation of aircraft, 5 per cent of the aggregate of the s.44BBA(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate takes in amounts paid or payable in or out of India for carriage from any place in India, and only amounts received or deemed to be received in India for carriage from any place outside India. As printed on the two departmental editions read this pass, the section contains no mechanism by which lower profits may be claimed on audited books.
Not applicable — this is a statement of statutory text taken from two departmental editions. No judicial reasoning is involved. The comparison with s.44BB(3) and s.44BBB(2) is a comparison of statutory texts separately transcribed for the companion entries in this batch. In the words reproduced by the source cited on this page: "44BBA. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of aircraft, a sum equal to five 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"."
It was decided by the CBDT Circulars & Instructions on 1988-04-01 and is reported as Income-tax Act, 1961, s.44BBA, as printed on the departmental Year 2009 and Year 2000 pages; inserted by the Finance Act, 1987 with effect from 1 April 1988 per the footnote on those pages. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 44BBA, section 44BBA(1), section 44BBA(2), section 44B, section 44BB, section 44BB(3), section 44BBB, section 44BBB(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. For a non-resident engaged in the business of operation of aircraft, 5 per cent of the aggregate of the s.44BBA(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate takes in amounts paid or payable in or out of India for carriage from any place in India, and only amounts received or deemed to be received in India for carriage from any place outside India. As printed on the two departmental editions read this pass, the section contains no mechanism by which lower profits may be claimed on audited books. It arises in Presumptive Taxation & Audit, Assessment & Scrutiny and How Tax Law Is Read matters, on section 44BBA, section 44BBA(1), section 44BBA(2), section 44B, section 44BB, section 44BB(3), section 44BBB, section 44BBB(2) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If s.44BBA applies, do not spend effort assembling audited accounts to show a lower profit: the section contains no provision that permits the claim. Put the effort into the applicability question or the treaty. Split the receipts by origin. Carriage from a place in India goes into clause (a) whether the money is paid in or out of India; carriage from a place outside India goes into clause (b) only to the extent received or deemed received in India. Where a treaty air-transport Article applies, take it first and name the treaty. The domestic 5 per cent does not survive an exclusive allocation of the profits to the State of the enterprise. Do not quote s.44BB(3) or s.44BBB(2) at an Assessing Officer applying s.44BBA. Those sub-sections were inserted into their own sections by the Finance Act 2003 and no equivalent was inserted here.
Still good law. Two departmental editions, Year 2000 and Year 2009, print the section identically and neither carries any amending-Act footnote beyond the insertion by the Finance Act 1987. That is the best evidence obtainable on this pass that the section is unchanged. No Finance Act text was retrieved this pass and I could not establish whether a departmental edition later than Year 2009 exists. I carried out no check of judicial treatment of s.44BBA on this pass. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The section text above was transcribed twice from departmental pages, each printing the Act name "Income-tax Act, 1961" and the section heading "Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents" alongside its Year stamp: https://incometaxindia.gov.in/w/section-44bba (Year: 2009) and https://incometaxindia.gov.in/w/section-44bba-1 (Year: 2000). Both print sub-sections (1) and (2) word for word identically. On each page I asked for the ENTIRE section in sequence and asked expressly whether any sub-section (3) or any proviso permitting a lower profits claim is printed; both pages answered that none is. That is the basis, and the only basis, for the negative stated in this entry — it is a statement about what these two departmental editions print, not a claim that no such provision has ever existed. The commencement is taken from the footnote printed on the Year 2009 page: footnote 85, "Inserted by the Finance Act, 1987, w.e.f. 1-4-1988"; the Year 2000 page carries the same footnote as its footnote 9. I did not verify that reference against the Finance Act 1987 itself. I could not establish whether a departmental edition of s.44BBA later than Year 2009 exists. 'decided_on' is the COMMENCEMENT DATE of the section — inserted by the Finance Act, 1987, w.e.f. 1 April 1988 per footnote 85 — and is not a decision date; no later amending footnote is printed on either edition read; 'bench' and 'favours' are inapplicable to a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
For a non-resident engaged in the business of operation of aircraft, 5 per cent of the aggregate of the s.44BBA(2) amounts is deemed to be the profits of that business, notwithstanding sections 28 to 43A. The aggregate takes in amounts paid or payable in or out of India for carriage from any place in India, and only amounts received or deemed to be received in India for carriage from any place outside India. As printed on the two departmental editions read this pass, the section contains no mechanism by which lower profits may be claimed on audited books.
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