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Issues: Whether receipts from hiring or leasing rigs to an Indian entity for drilling and exploration of mineral oils were assessable under Section 44BB of the Income-tax Act, 1961, or taxable as royalty under Section 9(1)(vi) of the Income-tax Act, 1961.
Analysis: The receipts arose from giving rigs on hire or lease for use in drilling and exploration of mineral oils. Clause (iv-a) of Explanation 2 to Section 9(1)(vi) treats the use or right to use industrial, commercial or scientific equipment as royalty, but expressly excludes amounts referable to Section 44BB. Since the factual position of leasing rigs was undisputed and the amounts were connected with drilling and exploration activities, the exclusion in Section 9(1)(vi) operated in favour of assessment under Section 44BB.
Conclusion: The receipts were rightly treated under Section 44BB and not as royalty under Section 9(1)(vi); the challenge to the Tribunal's view failed.
Final Conclusion: The appeal was dismissed and the Tribunal's treatment of the receipts as taxable under the special presumptive regime remained undisturbed.
Ratio Decidendi: Where hire or lease receipts for rigs used in mineral oil drilling and exploration fall within the specific exclusion linked to Section 44BB, they are to be assessed under Section 44BB and not as royalty under Section 9(1)(vi).
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