Section 44BB applies to seismic vessel hire receipts used in mineral oil exploration, not royalty treatment.

Rental receipts from seismic survey vessels hired to a non-resident charterer for geophysical prospection and mineral oil exploration are covered by the presumptive regime in section 44BB, because the vessels were supplied on hire for operations integrally connected with prospecting for, or extraction or production of, mineral oils. The absence of a direct contract with the oil exploration company did not exclude the taxpayer from section 44BB, and the arrangement was not treated in substance as a mere time-charter. Once section 44BB applied, the receipts were not taxable as royalty under section 9(1)(vi) or Article 13 of the India-France DTAA.

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Issues: Whether rental receipts from seismic survey vessels leased to a non-resident charterer for use in seismic operations connected with mineral oil exploration were taxable under section 44BB of the Income-tax Act, 1961 or as royalty under section 9(1)(vi) and Article 13 of the India-France DTAA.

Analysis: Section 44BB is a special presumptive provision for a non-resident engaged in supplying plant and machinery on hire used, or to be used, in prospecting for, or extraction or production of, mineral oils. The contractual arrangements showed that the vessels were provided specifically for geophysical prospection and seismic survey work, which formed an integral part of exploration activity. The absence of a direct contract with the oil exploration company did not disqualify the assessee, because the provision does not confine its benefit only to a main contractor. The agreements were not mere time-charter arrangements in substance, and the receipts could not be characterised as royalty when the consideration was for hiring vessels used in mineral oil exploration. Once section 44BB applied, the exclusion in section 9(1)(vi) operated and the royalty characterization under the DTAA also failed.

Conclusion: The receipts were held taxable under section 44BB and not as royalty under section 9(1)(vi) or Article 13 of the DTAA; the assessee succeeded.

Final Conclusion: The assessment based on royalty treatment was set aside and the assessee's claim for presumptive taxation under section 44BB was accepted.

Ratio Decidendi: A non-resident supplying vessels or other plant and machinery on hire for seismic survey or similar operations integrally connected with mineral oil exploration is covered by section 44BB, even if it acts as a sub-contractor and even if the contract is described as a time charter; such receipts are not to be taxed as royalty when the statutory exclusion applies.

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