The income tax department served a notice to BG International challenging the return. The company explained, "The transaction between assessee and BG Exploration & Production India Ltd was in the nature of reimbursement of the actual cost and devoid of any element of profit." ITAT held that the income of BGEPIL, the Indian subsidiary, should be computed in terms of section 44BB of the Income-Tax Act, 1961, which mandates that income from provision of services and facilities in connection with the mineral oil business in India will be computed by applying a deemed profit rate of 10 per cent of gross receipts.
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