Section 44BB deemed profit computation cannot be enlarged by multiple-stage grossing up under section 195A.

Section 44BB operates as a self-contained computation code for deemed profits from oil exploration activities of a non-resident, and section 195A does not function as a charging provision. Tax deduction at source therefore does not alter the character of the receipt or justify multiple-stage grossing up of deemed income. The benefit arising where tax is borne by the payer is to be valued on a single-stage basis, and the Revenue's attempt to enlarge deemed profits was rejected.

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Issues: Whether income computed on a deemed basis under section 44BB of the Income-tax Act, 1961, could be subjected to multiple stage grossing up under section 195A of the Income-tax Act, 1961.

Analysis: Section 44BB was treated as a self-contained provision governing computation of deemed profits from oil exploration activities of a non-resident. Section 195A was held to operate in the context of tax deduction and recovery under Chapter XVII and not as a charging provision. The liability to deduct tax at source did not alter the character of the receipt or justify enhancing the deemed profit by applying multiple stage grossing up. The benefit arising from tax being borne by the payer was required to be valued on a single-stage basis, and the Revenue's method was rejected.

Conclusion: Multiple stage grossing up was not applicable to income computed under section 44BB, and section 195A could not be invoked to enlarge the deemed profits; the question was answered in favour of the assessee.

Ratio Decidendi: Section 44BB governs computation of deemed profits as a complete code, while section 195A is confined to tax deduction and recovery and cannot be used to apply multiple stage grossing up to such deemed income.

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