Section 44BB applies to vessel hire receipts used in offshore mineral oil-related operations despite no direct privity

Receipts from a vessel hired for offshore construction and pipeline-related operations were taxable under section 44BB because direct contractual privity with the entity engaged in mineral oil operations was not essential. The Tribunal followed its earlier decision in the assessee's own case and held that use of the vessel in activities connected with prospecting, extraction, or production of mineral oils satisfied the statutory nexus. The receipt from M/s. Leighton Contractors (India) P. Ltd. was therefore brought within section 44BB.

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Issues: Whether the amounts received from the Leighton project were taxable under section 44BB of the Income-tax Act, 1961.

Analysis: Section 44BB provides a presumptive method for computing profits from services or facilities provided, or plant and machinery supplied on hire, in connection with prospecting for, extraction of, or production of mineral oils. The Tribunal followed its earlier decision in the assessee's own case and held that direct contractual privity with the person actually engaged in mineral oil operations is not essential. It was sufficient that the hired vessel was used in activities connected with offshore construction and pipeline-related operations forming part of the mineral oil business. The Tribunal therefore reversed the view that the receipt could not be taxed under section 44BB.

Conclusion: The receipt from M/s. Leighton Contractors (India) P. Ltd. is taxable under section 44BB and the Revenue succeeds on this issue.

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