JUDGMENT : G.B. Patnaik, J. - The Tribunal has referred the following two questions for the opinion of this Court which arise out of the second appellate order of the Tribunal: 1. Whether, on the facts and in the circumstances of the case, the income tax borne by Oil India Ltd. in respect of contracts with non-resident is not taxable as income of the non-resident? 2. If the answer to question No. 1 is in the negative, whether the entire or 10 per cent of tax borne by Oil India Ltd., should be taken as income of the non-resident firm considering the provisions of section 44BB and other sections of the income tax Act, 1961? The aforesaid two questions arise under the following circumstances. However, Well Services Ltd., a non-resident firm, had entered into an agreement with Oil India Ltd., in connection with mineral oil exploration activity in the Mahanadi basin. Under the contract, the Indian firm, namely, Oil India Ltd., had undertaken the liability to pay the income tax which is otherwise payable by the non-resident firm. Oil India Ltd. filed the necessary income tax return as an agent of the non-resident firm. In the return, it was indicated that as the non-resident firm had rendered its services in connection with mineral oil exploration activities, the provisions of section 44BB of the income tax Act, 1961 ('the Act') would apply in respect of the tax paid by the Oil India Ltd. under the agreement in question. The ITO, however, did not accept the contention and treated the amount which had been paid by Oil India Ltd., towards income tax as the business profit of the non-resident firm and included the same in the total income and determined the tax liability. The assessee being aggrieved by the said order preferred an appeal to the Commissioner (Appeals). The appellate authority came to the conclusion that the tax paid by the Indian firm towards the liability of the non-resident firm formed part of the consideration for services rendered by the said non-resident firm and, therefore, u/s 44BB, 10 per cent of the said amount would be taken as income. The appellate authority further held that the amount paid by the Indian firm towards tax cannot be assessed as perquisite u/s 28(iv) of the Act. The appellate authority, accordingly, directed the ITO to re-compute the tax liability. The appellate authority further held that the amount paid by the Indian firm towards tax cannot be assessed as perquisite u/s 28(iv) of the Act. The appellate authority, accordingly, directed the ITO to re-compute the tax liability. Against the appellate order, the department filed second appeal before the Tribunal. The assessee also filed cross-objection. While the stand of the department before the Tribunal was that the amount paid by the Indian firm towards the tax liability of the non-resident firm must be held to be a receipt in the hands of the non-resident and as such taxable, the stand of the assessee was that the entire amount is non-taxable by virtue of application of section 44BB. The Tribunal, however, rejected the contention of the assessee and dismissed the cross-objection, but allowed the appeal of the department on a finding that the liability of income tax of the nonresident firm is not the payment for the services rendered by them for exploring oil, but it is an independent liability and, therefore, the entire amount should be considered as taxable income. The assessee thereafter moved the Tribunal u/s 256(1) of the Act and the Tribunal having referred the questions as already stated, the matter has come before us. 2. Dr. Pal, appearing for the assessee, contends that on a plain reading of the agreement between the parties, the conclusion is irresistible that the tax paid by the Oil India Ltd. which would have been otherwise paid by the non-resident firm is nothing but a benefit or perquisite and as such, would be taxable as profits of business. But special provision for computing such profits in connection with business of exploration of mineral oil having been made by the Parliament by insertion of section 44BB by the Finance Act, 1987 with retrospective effect from 1-4-1983, the entire amount of tax paid will not be taxable and the Tribunal committed gross error of law in holding that this is an independent receipt in the hands of the non-resident firm and, therefore, the same is taxable. Dr. Pal alternatively contends that even if the amount would be paid to be taxable, but by application of section 44BB, only 10 per cent of the same can be held to be chargeable to tax by virtue of the deeming provision under sub section (1) of section 44BB. Mr. Dr. Pal alternatively contends that even if the amount would be paid to be taxable, but by application of section 44BB, only 10 per cent of the same can be held to be chargeable to tax by virtue of the deeming provision under sub section (1) of section 44BB. Mr. Ray, the learned standing counsel for the department, on the other hand, contends that the payment made by the Indian firm towards the tax liability of the non-resident firm must be held to be an independent income or income from other sources and, therefore, the Tribunal rightly held the entire amount to be taxable. 3. The correctness of the rival submissions would depend upon an examination of some provisions of the Act as well as the terms and conditions of the agreement under which the Indian firm undertook the liability of making all payments towards income tax to which the non resident firm would have otherwise been liable and as to what would be the character of such payment. The learned standing counsel with reference to the definition of 'income' in section 2(24) of the Act and the charging section u/s 5 as well as the different heads of income defined in section 14 of the Act contends that the income tax paid by the Indian firm which would have otherwise been paid by the non-resident firm must be held to be an income from other sources of the non-resident firm and, therefore, is liable to be taxed. There is no dispute that the non resident firm had entered into an agreement with the Indian firm and carried on the business of exploration of oil in the Mahanadi basin. Under the terms of the agreement, apart from payments to be made to the non resident firm by the Indian firm, it was also stipulated that the entire tax liability would be borne by the Indian firm. It is this payment made by the Indian firm towards tax liability of the non-resident firm which is the subject-matter of dispute. On examining the definition of 'income' in section 2(24) as well as the heads of income as indicated in section 14, it is difficult for us to accept the contention of the revenue that it would be an independent income of the non-resident firm. On examining the definition of 'income' in section 2(24) as well as the heads of income as indicated in section 14, it is difficult for us to accept the contention of the revenue that it would be an independent income of the non-resident firm. On the other hand, it would be profit or gains of business under the head 'D' in section 14. Section 28 defines as to what income shall be chargeable to income tax under the head 'Profits and gains of business or profession'. Section 28(iv) which came to the statute book by the Finance Act, 1964 with effect from 1-4-1964 provides: (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; The non-resident firm having entered into an agreement with the Indian firm and having taken up the business of exploration of mineral oil in the Mahanadi basin and having agreed to be paid a particular sum as indicated in the agreement, and the Indian firm having taken up the liability of paying the entire income tax dues payable by the non-resident firm, the same will partake of the character of a perquisite arising from the business of exploration of mineral oil. This question has been already decided by a Bench of this Court under similar circumstances in the case of Commissioner of Income Tax Vs. American Consulting Corporation, and the agreement in that case is identical with the agreement in the case in hand. This Court ultimately came to hold that it was a perquisite which arises to the non-resident firm and as such, is taxable as profits of its business. But by the date of the aforesaid judgment, the special provision of computation as contained in section 44BB had not been engrafted and, on the other hand, section 28(iv) had been engrafted and, accordingly, the Court answered the question. But with regard to the characteristic of the payment, the ratio of the aforesaid case would apply with full force to the present case and, consequently, it must be held that the tax liability met by the Oil India Ltd., is a perquisite which the non-resident firm had been granted under the agreement and, therefore, it is taxable as profits of business. The further question that would arise is, whether section 44BB would apply or not. The further question that would arise is, whether section 44BB would apply or not. Section 44BB is a special provision for computing profits and gains in connection with the business of exploration of mineral oil. The Parliament engrafted the aforesaid provision in the Act as a measure of simplification providing for determination of income of such tax-payers at 10 per cent of the aggregate of certain amount. By virtue of section 44BB and because of the non obstante clause, section 28 will have no application. In other words, the value of the perquisite arising from the business will have to be computed as provided in section 44BB(1) when the business is exploration of mineral oil. Dr. Pal appearing for the assessee, however, contends that in view of sub-section (2) of section 44BB, the amount referred to in sub-section (1) has to be such amount as contained in clauses (a) and (b) of sub-section (2) and obviously, therefore, perquisite arising from the business not being included therein, the entire amount will be non-taxable. It is difficult to accept this contention since once it is held that the payment thus made towards the income tax liability of the non-resident firm by the Indian firm is a perquisite arising from the business of oil exploration, it must be held to be an income of the non-resident firm, but would be taxable only in accordance with section 44BB(1) and, consequently, only 10 per cent of the said income would be deemed to be the gains of such business chargeable to tax and not the entire amount, as has been held by the Tribunal. In the aforesaid premises, our answers to the questions posed are: 1. On the facts and in the circumstances of the case, the tax liability of the non-resident firm which has been undertaken by the Indian firm and has been paid by the Indian firm would be a perquisite arising from the business of oil exploration under the agreement entered into by the non-resident firm with the Indian firm and would be taxable as such. 2. The computation of the same will have to be made under sub section (1) of section 44BB and, therefore, only 10 per cent of the same would be deemed to be the profits of such business chargeable to tax and not the entire sum. These batch of references are answered accordingly. Naik, J. I agree.