Section 44BB(3)

Section 44BB(3) — the law in short

What the courts have decided on section 44BB(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Sedco Forex International Inc v CIT Supreme CourtHelps department
  We are a non-resident drilling contractor taxed under section 44BB. Is the mobilisation fee for bringing the rig to India part of the taxable receipts?
  Yes, on these contracts. The Supreme Court held that a fixed mobilisation fee paid for moving a drilling unit to the Indian location falls within clause (a) of section 44BB(2), as an amount paid on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used in, the extraction of mineral oils in India. Clause (a) applies whether the amount is paid in or outside India. By the fiction in section 44BB the amount becomes income under section 5 and is treated as arising in India for section 9. The assessees' appeals were dismissed.
• DIT (International Taxation) v Schlumberger Asia Services Ltd (Full Bench) High CourtHelps taxpayerValidity unconfirmed
  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).
• 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.
• Statutory position — section 44BBB: the 10 per cent turnkey power presumption, the international-aid condition dropped in 2003, and the lower-profit claim in sub-section (2) CBDT Circulars & InstructionsCuts both ways
  We are a foreign company erecting plant for a power project in India. The Assessing Officer wants to tax 10 per cent of our billings under section 44BBB although our audited books show much less. Can we claim the lower figure, and does it matter that our project is not funded by any aid programme?
  You can claim the lower figure, and the aid-funding point no longer matters. Section 44BBB(2), inserted by the Finance Act 2003 with effect from 1 April 2004, provides that notwithstanding sub-section (1) an assessee may claim lower profits and gains than the 10 per cent, if he keeps and maintains books of account and other documents as required under s.44AA(2) and gets his accounts audited and furnishes the audit report as required under s.44AB — whereupon the Assessing Officer must proceed to make an assessment of the total income or loss under s.143(3). The same Finance Act 2003 omitted, with effect from the same date, the words "and financed under any international aid programme" which until then had confined the section to aid-funded turnkey power projects; what remains is the requirement that the turnkey power project be approved by the Central Government in that behalf.
• Statutory position — section 44BBA: the 5 per cent presumption for a non-resident operating aircraft, and the lower-profit option it does not contain CBDT Circulars & InstructionsCuts both ways
  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.
• Statutory position — section 44B: the 7.5 per cent shipping presumption, and why clause (i) and clause (ii) of sub-section (2) are not symmetrical CBDT Circulars & InstructionsCuts both ways
  We are a foreign shipping line assessed under section 44B. The Assessing Officer has included freight we collected abroad and also our demurrage. What actually goes into the "aggregate of the amounts" under section 44B(2), and does it matter where the money was received?
  It matters, but only for cargo shipped at a port OUTSIDE India. Section 44B(2) has two clauses and they are deliberately different: clause (i) takes in the amount paid or payable "whether in or out of India" on account of carriage of passengers, livestock, mail or goods shipped at any port IN India, so where the freight was collected is irrelevant for an Indian loading; clause (ii) takes in only the amount "received or deemed to be received in India" on account of carriage of goods shipped at any port OUTSIDE India, so for a foreign loading receipt in India is the condition of charge. The Explanation to sub-section (2) then provides that the amount referred to in either clause shall include amounts by way of demurrage charges or handling charges or any other amount of similar nature.

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.