Foreign companies in civil construction / turnkey power projects — 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 44BBB — Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: For foreign company engaged in business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a TURNKEY POWER PROJECT approved by Central Government — deemed PGBP at 10% of amount paid or payable to the assessee on account of such activities. The project approval and 'turnkey' character are essential conditions.
Section Commentary
Foreign companies in turnkey power projects
Section 44BBB is a narrow but important presumptive regime for FOREIGN COMPANIES engaged in CIVIL CONSTRUCTION or ERECTION / TESTING / COMMISSIONING of plant or machinery in connection with a TURNKEY POWER PROJECT approved by the Central Government. Deemed PGBP: 10% of amounts paid / payable on account of such activities. Two conditions are essential: (i) Central Government approval as 'turnkey power project'; (ii) scope falling within the listed activities.
Approval is substantive — Mitsubishi Corpn.
Mitsubishi Corpn. (Del ITAT) — both Central Government approval as 'turnkey power project' AND scope falling within civil construction / erection / testing / commissioning are substantive conditions. Absent approval, s. 44BBB does not apply — the assessee falls back to ordinary FTS / s. 44DA / DTAA framework.
Onshore-offshore split — Hyundai
Hyundai Heavy Industries (SC 2007) — for foreign contractors, profits attributable to in-India operations are taxable. Where s. 44BBB applies, the 10% rate is applied to IN-INDIA amounts. Offshore design / fabrication outside India is not within India's source jurisdiction. Hitachi Power Europe (Chennai ITAT) — off-shore equipment supplies (where title passes outside India) fall OUTSIDE s. 44BBB base.
Reimbursement inclusion — Mitsui & Co.
Mitsui & Co. (Del ITAT) — s. 44BBB(2) gross includes all amounts paid in connection with the activities, including reimbursements, mobilisation, demobilisation. Mirrors s. 44BB principles.
BHEL collaborations — practical interface
Common pattern: BHEL (domestic) ties with foreign EPC for turnkey power projects. TDS u/s 195 on payment to foreign company must accommodate s. 44BBB (10% presumptive) if collaborator opts. Lower-deduction certificates u/s 197 facilitate.
CA's contract review
(i) Verify CG approval as 'turnkey power project' (typically Ministry of Power / DPE notification). (ii) Scope-review: civil construction + erection + testing + commissioning. (iii) Separate offshore supply portion. (iv) Apply 10% to in-India portion only. (v) For Indian collaborators, structure TDS withholding on s. 44BBB-equivalent basis.
Facts & Issue: Foreign company engaged in EPC for power project — claim under s. 44BBB. Revenue questioned the 'turnkey' nature and approval status.
Held / Ratio: Held that s. 44BBB applies only where (i) Central Government has approved the project as 'turnkey power project' AND (ii) the scope covers civil construction or erection / testing / commissioning. Both conditions are substantive.
Section relevance: Defines mandatory approval and 'turnkey' tests under s. 44BBB.
2. Hyundai Heavy Industries Co. Ltd. v. ACIT
Citation: (2007) 291 ITR 482 (SC) — principles
Forum: Supreme Court of India
Facts & Issue: Although primarily on offshore-onshore split for foreign companies in projects, the principles inform s. 44BBB application.
Held / Ratio: Held that for foreign contractors, profits attributable to operations in India are taxable. Where s. 44BBB applies, the 10% rate is applied to in-India amounts; offshore design/fabrication outside India is not within s. 44BBB.
Section relevance: Cross-cutting — informs s. 44BBB's onshore-offshore split.
Facts & Issue: Whether off-shore supplies of equipment for turnkey power project are within s. 44BBB base.
Held / Ratio: Held that off-shore supplies (where title passes outside India) are NOT within s. 44BBB — they fall outside India's source jurisdiction. Section 44BBB applies to the in-India elements (civil construction, erection, testing, commissioning).
Section relevance: Important — offshore-supply exclusion under s. 44BBB.
Facts & Issue: Treatment of 'cost' components — reimbursement, mobilisation, demobilisation — within s. 44BBB base.
Held / Ratio: Held that s. 44BBB(2) gross base includes all amounts paid in connection with the activities, including reimbursements. The 10% rate is computed on gross.
Section relevance: Gross-base computation under s. 44BBB — analogous to s. 44BB.
5. BHEL v. CIT (interaction)
Citation: Various ITAT
Forum: Multiple Tribunal benches
Facts & Issue: Domestic BHEL teaming with foreign companies in turnkey projects — withholding-tax (TDS u/s 195) implications and s. 44BBB option for foreign collaborator.
Held / Ratio: Held that foreign collaborator's TDS under s. 195 must accommodate s. 44BBB (10% presumptive) if the collaborator opts. Lower-deduction certificates u/s 197 facilitate the option.
Section relevance: Important practical interface — s. 44BBB and TDS u/s 195.
Function in the statutory architecture
Foreign companies in civil construction / turnkey power projects — 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 44BBB — Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects
Important Case Laws — 1961 Treatise (FA 2026)
Provision in brief: For foreign company engaged in business of civil construction or erection of plant or machinery or testing or commissioning thereof, in connection with a TURNKEY POWER PROJECT approved by Central Government — deemed PGBP at 10% of amount paid or payable to the assessee on account of such activities. The project approval and 'turnkey' character are essential conditions.
Section Commentary
Foreign companies in turnkey power projects
Section 44BBB is a narrow but important presumptive regime for FOREIGN COMPANIES engaged in CIVIL CONSTRUCTION or ERECTION / TESTING / COMMISSIONING of plant or machinery in connection with a TURNKEY POWER PROJECT approved by the Central Government. Deemed PGBP: 10% of amounts paid / payable on account of such activities. Two conditions are essential: (i) Central Government approval as 'turnkey power project'; (ii) scope falling within the listed activities.
Approval is substantive — Mitsubishi Corpn.
Mitsubishi Corpn. (Del ITAT) — both Central Government approval as 'turnkey power project' AND scope falling within civil construction / erection / testing / commissioning are substantive conditions. Absent approval, s. 44BBB does not apply — the assessee falls back to ordinary FTS / s. 44DA / DTAA framework.
Onshore-offshore split — Hyundai
Hyundai Heavy Industries (SC 2007) — for foreign contractors, profits attributable to in-India operations are taxable. Where s. 44BBB applies, the 10% rate is applied to IN-INDIA amounts. Offshore design / fabrication outside India is not within India's source jurisdiction. Hitachi Power Europe (Chennai ITAT) — off-shore equipment supplies (where title passes outside India) fall OUTSIDE s. 44BBB base.
Reimbursement inclusion — Mitsui & Co.
Mitsui & Co. (Del ITAT) — s. 44BBB(2) gross includes all amounts paid in connection with the activities, including reimbursements, mobilisation, demobilisation. Mirrors s. 44BB principles.
BHEL collaborations — practical interface
Common pattern: BHEL (domestic) ties with foreign EPC for turnkey power projects. TDS u/s 195 on payment to foreign company must accommodate s. 44BBB (10% presumptive) if collaborator opts. Lower-deduction certificates u/s 197 facilitate.
CA's contract review
(i) Verify CG approval as 'turnkey power project' (typically Ministry of Power / DPE notification). (ii) Scope-review: civil construction + erection + testing + commissioning. (iii) Separate offshore supply portion. (iv) Apply 10% to in-India portion only. (v) For Indian collaborators, structure TDS withholding on s. 44BBB-equivalent basis.
FA 2026 impact: No FA 2026 amendment.
Leading Decisions
1. DDIT v. M/s. Mitsubishi Corpn.
Citation: (2018) 95 taxmann.com 244 (Del ITAT) — principles
Forum: ITAT Delhi
Facts & Issue: Foreign company engaged in EPC for power project — claim under s. 44BBB. Revenue questioned the 'turnkey' nature and approval status.
Held / Ratio: Held that s. 44BBB applies only where (i) Central Government has approved the project as 'turnkey power project' AND (ii) the scope covers civil construction or erection / testing / commissioning. Both conditions are substantive.
Section relevance: Defines mandatory approval and 'turnkey' tests under s. 44BBB.
2. Hyundai Heavy Industries Co. Ltd. v. ACIT
Citation: (2007) 291 ITR 482 (SC) — principles
Forum: Supreme Court of India
Facts & Issue: Although primarily on offshore-onshore split for foreign companies in projects, the principles inform s. 44BBB application.
Held / Ratio: Held that for foreign contractors, profits attributable to operations in India are taxable. Where s. 44BBB applies, the 10% rate is applied to in-India amounts; offshore design/fabrication outside India is not within s. 44BBB.
Section relevance: Cross-cutting — informs s. 44BBB's onshore-offshore split.
3. DCIT v. M/s. Hitachi Power Europe GmbH
Citation: (2019) 105 taxmann.com 50 (Chennai ITAT)
Forum: ITAT Chennai
Facts & Issue: Whether off-shore supplies of equipment for turnkey power project are within s. 44BBB base.
Held / Ratio: Held that off-shore supplies (where title passes outside India) are NOT within s. 44BBB — they fall outside India's source jurisdiction. Section 44BBB applies to the in-India elements (civil construction, erection, testing, commissioning).
Section relevance: Important — offshore-supply exclusion under s. 44BBB.
4. ACIT v. Mitsui & Co. Ltd.
Citation: (2018) 192 TTJ 481 (Del ITAT) — principles
Forum: ITAT Delhi
Facts & Issue: Treatment of 'cost' components — reimbursement, mobilisation, demobilisation — within s. 44BBB base.
Held / Ratio: Held that s. 44BBB(2) gross base includes all amounts paid in connection with the activities, including reimbursements. The 10% rate is computed on gross.
Section relevance: Gross-base computation under s. 44BBB — analogous to s. 44BB.
5. BHEL v. CIT (interaction)
Citation: Various ITAT
Forum: Multiple Tribunal benches
Facts & Issue: Domestic BHEL teaming with foreign companies in turnkey projects — withholding-tax (TDS u/s 195) implications and s. 44BBB option for foreign collaborator.
Held / Ratio: Held that foreign collaborator's TDS under s. 195 must accommodate s. 44BBB (10% presumptive) if the collaborator opts. Lower-deduction certificates u/s 197 facilitate the option.
Section relevance: Important practical interface — s. 44BBB and TDS u/s 195.
— End of Section 44BBB Case-Law Note —