Section 44BB applies to mineral oil equipment hire receipts, excluding royalty treatment under domestic law and treaty.

Equipment rental receipts from leasing machinery used in mineral oil exploration fell within the special scheme of section 44BB because the hire activity related to equipment used or to be used in prospecting, extraction, or production of mineral oils. Explanation 2(iva) to section 9(1)(vi) excludes from royalty amounts covered by section 44BB, and the absence of a permanent establishment condition in section 44BB reinforced its special character. On identical facts, the assessee's earlier year decision was followed, and the receipts were held taxable under section 44BB rather than as royalty under section 9(1)(vi) or Article 12 of the India-Malaysia DTAA.

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Issues: Whether equipment rental receipts from leasing machinery and equipment used in mineral oil exploration were taxable under section 44BB of the Income-tax Act, 1961 or as royalty under section 9(1)(vi) of the Income-tax Act, 1961 and Article 12 of the India-Malaysia DTAA.

Analysis: The receipts arose from giving on hire equipment used or to be used in prospecting, extraction, or production of mineral oils, bringing the activity within the special scheme of section 44BB. The exclusion in Explanation 2(iva) to section 9(1)(vi) removes from the definition of royalty the amounts referred to in section 44BB. The absence of a permanent establishment condition in section 44BB and the special character of that provision meant that the receipts could not be taxed as royalty merely because they involved use of equipment. The earlier decision in the assessee's own case on identical facts was followed.

Conclusion: The receipts were taxable under section 44BB and not as royalty under section 9(1)(vi) or Article 12 of the India-Malaysia DTAA. The appeals were allowed.

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