Law:

Section:

Section 44BB of the Income-tax Act, 1961 - Mineral oil, business for exploration, etc. - Corporate tax on behalf of assessee-non-resident company was paid by an Indian company 'O' Ltd. - Assessing Officer treated said amount as perquisite under section 28(iv) and made an addition separately to income of assessee - Whether in view of section 44BB, 10 per cent of aggregate amount received should be treated as deemed income of assessee - Held, yes - Whether amount of corporate tax paid by 'O' Ltd. on behalf of assessee fell under section 44BB and only 10 per cent of that amount would be treated as income of assessee - Held, yes FACTS The assessee-non-resident company entered into a contract with an Indian company 'O' Ltd. for exploration, production and transportation of crude oil and natural gas. As per the terms of contract, 'O' Ltd. paid corporate tax on behalf of the assessee-company. However, during the assessment proceedings, the Assessing Officer treated the entire amount of corporate tax paid by 'O' Ltd., as perquisite within the meaning of section 28(iv ) and added that amount separately to the income of the assessee. On appeal the Commissioner (Appeals) observed that in view of the provisions of sub-section (2) of section 44BB tax can be levied at only 10 per cent of gross receipts and the gross receipts included the amount of tax and surtax paid by 'O' Ltd. on behalf of the assessee-company which view had also been affirmed by the Tribunal. On reference : HELD Considering the plain language used in section 44BB, which starts with non obstante clause, 10 per cent of aggregate amount received should be treated as deemed income of the assessee for that year. In the instant case, tax paid by the company was also the amount received which could be deemed to have been received by the assessee and paid. Therefore, there was no question of taking the total tax amount paid by the Indian company on behalf of the foreign assessee to tax and only 10 per cent of that amount could be taxed under section 44BB(2). [Para 6] In view of the above, there was no infirmity in the view taken by the Commissioner (Appeals) and the Tribunal. [Para 7] CASE REFERRED TO Oil India…

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