What the courts have decided on section 44BB(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Paradigm Geophysical Pty Ltd v CIT (International Taxation)-3
High CourtCuts both waysNo later treatment found
For AY 2012-13 the officer moved us out of s.44BB into s.44DA. Does the Finance Act 2010 proviso really do that?
Yes. From 1 April 2011, income falling within the scope of s.44DA(1) is excluded from s.44BB, and if a non-resident's income is royalty or fees for technical services it is taxable under s.44DA or s.115A. But the exclusion only bites if the receipt really is royalty or FTS, and services for a mining or like project are carved out of the FTS definition in Explanation 2 to s.9(1)(vii) altogether.
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DIT (International Taxation) v Schlumberger Asia Services Ltd (Full Bench)
High CourtHelps taxpayer
Our Uttarakhand assessments add back the service tax ONGC reimbursed to us. Is there a binding answer in that High Court?
Yes, and it is against the Revenue. A Full Bench of the Uttarakhand High Court answered the reference holding that the amount reimbursed by ONGC to the service provider, representing service tax the provider had already paid to the Government, does not form part of the aggregate amount referred to in clauses (a) and (b) of s.44BB(2).
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DIT v Mitchell Drilling International Pvt Ltd
High CourtHelps taxpayer
The officer has added the service tax we collected from ONGC to our s.44BB gross receipts. Is that right?
No. Service tax collected by the assessee and passed on to the Government is not to be included in the gross receipts under s.44BB(2) read with s.44BB(1). It is not an amount paid or payable, or received or deemed to be received, for the services rendered — the assessee is only a collecting agency.
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Statutory position — section 44DA: royalty and fees for technical services effectively connected with a permanent establishment, and the second proviso that shuts section 44BB out from 1 April 2011
CBDT Circulars & InstructionsCuts both ways
Our foreign company earns fees for technical services from an Indian oil company and we have a permanent establishment here. We have always returned the income at 10 per cent under section 44BB. The Assessing Officer says section 44DA applies instead. When did that change, and what does section 44DA require us to do?
It changed with the Finance Act 2010, with effect from 1 April 2011, which inserted a second proviso to s.44DA(1) reading "Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section." Section 44DA(1) applies where royalty or fees for technical services are received from Government or an Indian concern under an agreement made after 31 March 2003, the non-resident or foreign company carries on business in India through a permanent establishment or performs professional services from a fixed place of profession, and the right, property or contract in respect of which the royalty or fees are paid is effectively connected with that permanent establishment or fixed place; the income is then computed under "Profits and gains of business or profession" in accordance with the provisions of the Act — that is, on a net basis — and s.44DA(2) requires books under s.44AA, an audit by an accountant within the meaning of the Explanation below s.288(2), and the audit report furnished along with the return.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
