Section 44BBB(1)

Section 44BBB(1) — the law in short

What the courts have decided on section 44BBB(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ADIT (International Taxation) v Shandong Tiejun Electric Power Engineering Co. Ltd — where s.44BBB(2) is complied with, the officer cannot reject the books under s.145(3) and fall back on the 10 per cent ITATHelps taxpayerValidity unconfirmed
  We are a foreign company on an approved turnkey power project. We keep books, they are audited, and we recognise revenue on percentage of completion under AS-7. The Assessing Officer has rejected the books under section 145(3) and taxed 10 per cent of our billings under section 44BBB(1). Can he do that?
  The Ahmedabad Bench of the Tribunal held he could not, on these facts, and dismissed the Revenue's appeal. Section 44BBB(2) gives the assessee an option to be assessed on lower profits on two conditions only — that it keeps and maintains books and other documents as required under s.44AA(2) and that it gets its accounts audited and furnishes the s.44AB report — and where those are satisfied and a recognised method of accounting under AS-7 has been regularly followed and disclosed, the officer's action in rejecting the books under s.145(3) and assessing under s.44BBB(1) on a presumptive basis is not justified.
• 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.

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.