Treaty relief for non-residents requires strict proof of all conditions; section 44BB can still apply to mineral oil services.

Treaty relief under article 16 of the relevant double taxation agreements depends on strict fulfilment of all cumulative conditions, including proof that the remuneration is not deductible in computing profits chargeable in the other Contracting State. Where that proof is not produced, the exemption is unavailable. The text also states that section 44BB applies as a special deeming provision for non-resident assessees engaged in services connected with mineral oil operations, and that absence of a permanent establishment or allegations of treaty shopping do not displace the treaty conditions themselves. On the stated facts, the domestic provision prevails and no treaty-based exemption is available.

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Issues: (i) Whether the appellants satisfied the cumulative conditions for exemption under article 16 of the relevant double taxation avoidance agreements, particularly the requirement that the remuneration was not deductible in computing the profits of an enterprise chargeable to tax in the other State; and (ii) whether the appellants, as non-resident assessees, were chargeable under section 44BB of the Income-tax Act, 1961 and were entitled to treaty protection despite the plea based on absence of permanent establishment or treaty shopping.

Issue (i): Whether the appellants satisfied the cumulative conditions for exemption under article 16 of the relevant double taxation avoidance agreements, particularly the requirement that the remuneration was not deductible in computing the profits of an enterprise chargeable to tax in the other State?

Analysis: The treaty benefit under article 16 was held to depend on fulfilment of all the stipulated conditions, which were cumulative. The stay in India requirement and the employer-residency requirement were treated as satisfied, but the decisive condition was whether the remuneration was not deductible in computing the profits chargeable to tax in the other Contracting State. The appellants failed to show by any material that the remuneration received for work in India was chargeable to tax in their State of residence, and therefore failed to establish entitlement to the exemption.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (ii): Whether the appellants, as non-resident assessees, were chargeable under section 44BB of the Income-tax Act, 1961 and were entitled to treaty protection despite the plea based on absence of permanent establishment or treaty shopping?

Analysis: Section 44BB was applied as a special provision deeming ten per cent of the prescribed receipts as profits and gains in the case of non-resident assessees engaged in services connected with mineral oil operations. The treaty argument based on absence of permanent establishment did not assist the appellants because the exemption under the relevant treaty article was confined to the contracting enterprise and the appellants did not establish compliance with the treaty conditions. The plea based on treaty shopping was also rejected as it could not override the treaty requirements.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Final Conclusion: The appellants were held liable to be assessed under the domestic provision, and no treaty-based exemption was available on the facts established.

Ratio Decidendi: Treaty relief under a double taxation avoidance agreement is available only when the assessee proves strict fulfilment of the treaty conditions, and in the absence of proof that the remuneration is chargeable to tax in the other Contracting State, the domestic charging and deeming provision prevails.

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