Services Intrinsically related to Exploration of Mineral Oils covered by S. 44BB: ITAT [Read Order]


The New Delhi bench of ITAT held that services intrinsically related to exploration of mineral oils covered by Section 44BB of the Income Tax Act.

In instant case, Assessee is a company incorporated under the United Kingdom, who have entered into a contract with Indian government along with other members for exploration, development and production of various mineral oil.

The issue began with Revenue raised an appeal before this tribunal regarding the denial of applicability of provision under section 44BB respect to income earned by the assessee in terms of production agreement with HOE company.

However, AO treated the income as the fee for technical services u/s 9(1)(vii) of the Act read with Section 44BA of the Act and estimated the profit at 25% of the gross receipts.

Accordingly, the Dispute Resolution Panel concluded that income received by assessee through the contract with HOEC must be taxed by calculating the deemed profit rate of 10% covered under section 44BB of the Act.

The bench including Judicial Member Narasimha Chary and Accountant Member N.K Saini found that in subsequent years AO had taken a view that nature of activities involved under the contract included the sale services of HOEC which were covered under the said provision.

The bench also read out all the services comes under the contract which clearly shows that such services are intrinsically related to the exploration of the mineral oils and covered by Section 44BB of the Income Tax Act.

Accordingly, the bench restored the decision of lower appellate authority and dismissed the same.

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