Treaty provision for vessel operations overrode presumptive taxation for transportation receipts linked to offshore exploration activities.

Receipts from operating vessels for transportation in aid of offshore exploration activities fell within Article 21(4) of the India-Norway DTAA because the assessee was not itself engaged in exploration or exploitation of the seabed, subsoil or their natural resources. The deeming rule in Article 21(2) and the limitation in Article 21(3) did not apply on the facts, and the treaty specifically covered profits from transporting supplies or personnel and operating tugboats or other auxiliary vessels. As a result, the special treaty provision prevailed over section 44BB of the Income-tax Act, 1961, and the income was taxed under the DTAA rather than under the domestic presumptive regime.

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Issues: Whether receipts from providing vessels for transportation to entities engaged in offshore exploration activities were taxable under section 44BB of the Income-tax Act, 1961, or were governed by Article 21(4) of the India-Norway DTAA.

Analysis: The assessee was not itself engaged in exploration or exploitation of the seabed or subsoil or their natural resources, so the deeming rule in Article 21(2) and the limitation in Article 21(3) did not apply. The receipts arose from the operation of vessels used for transportation in connection with such offshore activities, which fell within Article 21(4). The treaty provision specifically covered profits from transportation of supplies or personnel and operation of tugboats and other vessels auxiliary to such activities. Since the special treaty article governed the income, domestic computation under section 44BB could not be applied.

Conclusion: The issue was decided in favour of the assessee, and the receipts were held taxable under Article 21(4) of the India-Norway DTAA rather than under section 44BB of the Income-tax Act, 1961.

Ratio Decidendi: Where an assessee derives income from operating vessels for transportation in aid of offshore exploration activities, and is not itself engaged in exploration or exploitation of seabed or subsoil resources, the specific treaty provision governing such vessel operations prevails over the general domestic presumptive taxation provision.

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