Exploration of mineral oils (non-residents) — 10% of specified amounts deemed profits.
Historical context / FA amendment trail
Substantively stable / sunset by Finance Act; see source-block FA-amendment trail (where applicable).
Operative consequences
• Operates within the Chapter IV-D PGBP computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
SECTION 44BB — Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: For non-resident engaged in business of providing services or facilities in connection with, or supplying plant and machinery on hire used or to be used in, the prospecting for, or extraction or production of, mineral oils — deemed PGBP at 10% of: (a) amount paid or payable to assessee in or outside India on account of such services/facilities/equipment hire in India, AND (b) amount received in India on account of services rendered outside India. Carve-out: where s. 44DA or s. 115A applies, those govern. Provision is favoured for upstream-services service providers.
Section Commentary
Upstream petroleum services presumptive
Section 44BB is the presumptive regime for non-residents providing services or facilities, or supplying plant/machinery on hire used or to be used in PROSPECTING / EXTRACTION / PRODUCTION OF MINERAL OILS. Deemed PGBP: 10% of (i) amounts paid / payable in India or outside India for such services in India, and (ii) amounts received in India for services rendered outside India. Carve-out: where s. 44DA (FTS through PE) or s. 115A (FTS without PE) applies, those govern. The interplay is intricate — see Schlumberger (SB) below.
Section 44BB priority — ONGC landmark
ONGC Ltd. (SC 2015) is the landmark: services 'in connection with' the prospecting / extraction of mineral oils fall within s. 44BB EVEN IF they could otherwise be characterised as FTS. The 'connection with' test prevails over the 'character as FTS' test for upstream services. This significantly enlarges the scope of s. 44BB — which is favourable to assessees (10% vs higher FTS-tax rate).
Mobilisation fees — Sedco Forex
Sedco Forex (SC 2017) — mobilisation fees received OUTSIDE India by foreign driller fall within s. 44BB(2)(b) — 'amounts received outside India in connection with services / facilities / plant in India for mineral oil prospecting'. Geographic location of receipt is irrelevant; substantive connection with India operations is decisive.
Reimbursements — Halliburton
Halliburton Offshore Services (Uttarakhand) — ALL amounts paid / payable to the foreign service provider, INCLUDING REIMBURSEMENTS of costs and statutory levies, form part of s. 44BB(2) gross base. The 10% rate applies on inclusive gross. Attempts to net out reimbursements have been consistently rejected.
Elective regime — CGG Veritas
CGG Veritas (Del ITAT) — s. 44BB is OPTIONAL. Assessee can opt OUT by maintaining books, undertaking s. 44AB audit, and offering actual profits (likely lower) on return. The presumptive scheme is a simplification, not a mandate. Lower-profit declaration must be substantiated with full documentation.
Currency-neutral computation — Schlumberger SB
Schlumberger Asia Services (Del ITAT SB) — FX received outside India for services rendered in India falls within s. 44BB(2)(b). 10% rate applies uniformly regardless of currency / location of receipt.
FA 2010 amendment codified that FTS effectively connected with PE goes to s. 44DA (net basis); s. 44BB applies to receipts 'in connection with' oil exploration that are NOT FTS. The Schlumberger Special Bench and various tribunal lines elaborate the boundary. For pure-services where FTS character is established AND there is a PE, s. 44DA applies; otherwise s. 44BB.
Practitioners — upstream service providers
(i) Map each contract to s. 44BB vs s. 44DA vs s. 115A. (ii) For ambiguous services, prefer s. 44BB (favorable rate). (iii) Reimbursements — include in s. 44BB base; do not exclude. (iv) Mobilisation / demobilisation — include regardless of payment location. (v) For DTAA-eligible non-residents (e.g., UK, US, Singapore), test treaty position parallelly. (vi) Form 3CD if opting out of presumptive.
FA 2026 impact: No FA 2026 amendment. FA 2010 had clarified the s. 44BB / s. 44DA boundary — see Oil & Natural Gas Corpn. (2015) below.
Leading Decisions
1. Oil & Natural Gas Corpn. Ltd. v. CIT
Citation: (2015) 376 ITR 306 (SC)
Forum: Supreme Court of India
Facts & Issue: Question whether payments to foreign service providers for sub-sea installation, well drilling, seismic data acquisition fall within s. 44BB (10% presumptive) or are FTS taxable at 10% under s. 115A / s. 44DA.
Held / Ratio: The Supreme Court held that services 'in connection with' the prospecting/extraction of mineral oils fall within s. 44BB, even if they could otherwise be FTS. The connection-with-business test prevails. The Court emphasised the special provision overrides the general FTS provisions. Note: FA 2010 amendment had codified s. 44DA / s. 115A override for FTS rendered through PE — but services not falling within FTS go to s. 44BB.
Section relevance: Landmark — defines s. 44BB scope and its priority over FTS provisions.
2. CIT v. Halliburton Offshore Services Inc.
Citation: (2008) 300 ITR 265 (Uttarakhand)
Forum: Uttarakhand High Court
Facts & Issue: Question whether REIMBURSEMENT of costs (e.g., service tax / mobilisation) received by foreign service provider are included in s. 44BB base.
Held / Ratio: Held that ALL amounts paid or payable, including reimbursements of costs and statutory levies, form part of s. 44BB(2) gross. The Court applied gross-base principle and rejected attempts to net out reimbursements.
Section relevance: Defines gross-base inclusion under s. 44BB — including reimbursements.
3. Sedco Forex International Drilling Inc. v. CIT
Citation: (2017) 399 ITR 1 (SC)
Forum: Supreme Court of India
Facts & Issue: Mobilisation fees received outside India by foreign driller — whether included in s. 44BB base.
Held / Ratio: The Supreme Court held that s. 44BB(2) explicitly includes amounts received outside India 'on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India'. Mobilisation fees, being intrinsically connected with the work in India, are taxable under s. 44BB.
Section relevance: Cardinal on extra-territorial inclusion of mobilisation fees under s. 44BB.
4. CGG Veritas Services SA v. ACIT
Citation: (2012) 50 SOT 335 (Del ITAT)
Forum: ITAT Delhi
Facts & Issue: Foreign service provider's choice — s. 44BB (10% presumptive) vs return-of-income claiming actual profits (lower).
Held / Ratio: Held that s. 44BB is an option — assessee can opt out by maintaining books and offering actual profits (with audit). Lower-profit declaration is permitted but with full documentation. The option-based architecture is settled.
Section relevance: Defines elective character of s. 44BB.
5. DDIT v. Schlumberger Asia Services Ltd.
Citation: (2013) 145 ITD 38 (Del ITAT) (SB)
Forum: ITAT Special Bench, Delhi
Facts & Issue: Whether amounts received in foreign currency from ONGC for services / equipment are taxable under s. 44BB at 10% even where corresponding receipts in INR exist.
Held / Ratio: Special Bench held that FX received outside India for services rendered in India falls within s. 44BB(2)(b). The 10% rate applies uniformly regardless of currency. The Bench rejected attempts at currency-segmentation.
Section relevance: Important — currency-neutral computation under s. 44BB.
Function in the statutory architecture
Exploration of mineral oils (non-residents) — 10% of specified amounts deemed profits.
Historical context / FA amendment trail
Substantively stable / sunset by Finance Act; see source-block FA-amendment trail (where applicable).
Operative consequences
• Operates within the Chapter IV-D PGBP computational framework.
• Cross-references operative companion sections.
Case Laws & Commentary
SECTION 44BB — Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: For non-resident engaged in business of providing services or facilities in connection with, or supplying plant and machinery on hire used or to be used in, the prospecting for, or extraction or production of, mineral oils — deemed PGBP at 10% of: (a) amount paid or payable to assessee in or outside India on account of such services/facilities/equipment hire in India, AND (b) amount received in India on account of services rendered outside India. Carve-out: where s. 44DA or s. 115A applies, those govern. Provision is favoured for upstream-services service providers.
Section Commentary
Upstream petroleum services presumptive
Section 44BB is the presumptive regime for non-residents providing services or facilities, or supplying plant/machinery on hire used or to be used in PROSPECTING / EXTRACTION / PRODUCTION OF MINERAL OILS. Deemed PGBP: 10% of (i) amounts paid / payable in India or outside India for such services in India, and (ii) amounts received in India for services rendered outside India. Carve-out: where s. 44DA (FTS through PE) or s. 115A (FTS without PE) applies, those govern. The interplay is intricate — see Schlumberger (SB) below.
Section 44BB priority — ONGC landmark
ONGC Ltd. (SC 2015) is the landmark: services 'in connection with' the prospecting / extraction of mineral oils fall within s. 44BB EVEN IF they could otherwise be characterised as FTS. The 'connection with' test prevails over the 'character as FTS' test for upstream services. This significantly enlarges the scope of s. 44BB — which is favourable to assessees (10% vs higher FTS-tax rate).
Mobilisation fees — Sedco Forex
Sedco Forex (SC 2017) — mobilisation fees received OUTSIDE India by foreign driller fall within s. 44BB(2)(b) — 'amounts received outside India in connection with services / facilities / plant in India for mineral oil prospecting'. Geographic location of receipt is irrelevant; substantive connection with India operations is decisive.
Reimbursements — Halliburton
Halliburton Offshore Services (Uttarakhand) — ALL amounts paid / payable to the foreign service provider, INCLUDING REIMBURSEMENTS of costs and statutory levies, form part of s. 44BB(2) gross base. The 10% rate applies on inclusive gross. Attempts to net out reimbursements have been consistently rejected.
Elective regime — CGG Veritas
CGG Veritas (Del ITAT) — s. 44BB is OPTIONAL. Assessee can opt OUT by maintaining books, undertaking s. 44AB audit, and offering actual profits (likely lower) on return. The presumptive scheme is a simplification, not a mandate. Lower-profit declaration must be substantiated with full documentation.
Currency-neutral computation — Schlumberger SB
Schlumberger Asia Services (Del ITAT SB) — FX received outside India for services rendered in India falls within s. 44BB(2)(b). 10% rate applies uniformly regardless of currency / location of receipt.
Boundary with s. 44DA — FA 2010 codification
FA 2010 amendment codified that FTS effectively connected with PE goes to s. 44DA (net basis); s. 44BB applies to receipts 'in connection with' oil exploration that are NOT FTS. The Schlumberger Special Bench and various tribunal lines elaborate the boundary. For pure-services where FTS character is established AND there is a PE, s. 44DA applies; otherwise s. 44BB.
Practitioners — upstream service providers
(i) Map each contract to s. 44BB vs s. 44DA vs s. 115A. (ii) For ambiguous services, prefer s. 44BB (favorable rate). (iii) Reimbursements — include in s. 44BB base; do not exclude. (iv) Mobilisation / demobilisation — include regardless of payment location. (v) For DTAA-eligible non-residents (e.g., UK, US, Singapore), test treaty position parallelly. (vi) Form 3CD if opting out of presumptive.
FA 2026 impact: No FA 2026 amendment. FA 2010 had clarified the s. 44BB / s. 44DA boundary — see Oil & Natural Gas Corpn. (2015) below.
Leading Decisions
1. Oil & Natural Gas Corpn. Ltd. v. CIT
Citation: (2015) 376 ITR 306 (SC)
Forum: Supreme Court of India
Facts & Issue: Question whether payments to foreign service providers for sub-sea installation, well drilling, seismic data acquisition fall within s. 44BB (10% presumptive) or are FTS taxable at 10% under s. 115A / s. 44DA.
Held / Ratio: The Supreme Court held that services 'in connection with' the prospecting/extraction of mineral oils fall within s. 44BB, even if they could otherwise be FTS. The connection-with-business test prevails. The Court emphasised the special provision overrides the general FTS provisions. Note: FA 2010 amendment had codified s. 44DA / s. 115A override for FTS rendered through PE — but services not falling within FTS go to s. 44BB.
Section relevance: Landmark — defines s. 44BB scope and its priority over FTS provisions.
2. CIT v. Halliburton Offshore Services Inc.
Citation: (2008) 300 ITR 265 (Uttarakhand)
Forum: Uttarakhand High Court
Facts & Issue: Question whether REIMBURSEMENT of costs (e.g., service tax / mobilisation) received by foreign service provider are included in s. 44BB base.
Held / Ratio: Held that ALL amounts paid or payable, including reimbursements of costs and statutory levies, form part of s. 44BB(2) gross. The Court applied gross-base principle and rejected attempts to net out reimbursements.
Section relevance: Defines gross-base inclusion under s. 44BB — including reimbursements.
3. Sedco Forex International Drilling Inc. v. CIT
Citation: (2017) 399 ITR 1 (SC)
Forum: Supreme Court of India
Facts & Issue: Mobilisation fees received outside India by foreign driller — whether included in s. 44BB base.
Held / Ratio: The Supreme Court held that s. 44BB(2) explicitly includes amounts received outside India 'on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India'. Mobilisation fees, being intrinsically connected with the work in India, are taxable under s. 44BB.
Section relevance: Cardinal on extra-territorial inclusion of mobilisation fees under s. 44BB.
4. CGG Veritas Services SA v. ACIT
Citation: (2012) 50 SOT 335 (Del ITAT)
Forum: ITAT Delhi
Facts & Issue: Foreign service provider's choice — s. 44BB (10% presumptive) vs return-of-income claiming actual profits (lower).
Held / Ratio: Held that s. 44BB is an option — assessee can opt out by maintaining books and offering actual profits (with audit). Lower-profit declaration is permitted but with full documentation. The option-based architecture is settled.
Section relevance: Defines elective character of s. 44BB.
5. DDIT v. Schlumberger Asia Services Ltd.
Citation: (2013) 145 ITD 38 (Del ITAT) (SB)
Forum: ITAT Special Bench, Delhi
Facts & Issue: Whether amounts received in foreign currency from ONGC for services / equipment are taxable under s. 44BB at 10% even where corresponding receipts in INR exist.
Held / Ratio: Special Bench held that FX received outside India for services rendered in India falls within s. 44BB(2)(b). The 10% rate applies uniformly regardless of currency. The Bench rejected attempts at currency-segmentation.
Section relevance: Important — currency-neutral computation under s. 44BB.
— End of Section 44BB Case-Law Note —