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2017 (8) TMI 446 - AT - Income TaxIncome from supply of software and software maintenance/support services to the entities engaged in exploration of mineral oil - characterization of income - taxability as royalty - Indo-Canada Double Taxation Avoidance Agreement - taxable under the provisions of section 44D/44DA read with section 115A OR could be covered under the provisions of section 44BB of the Act - Held that:- Respectfully following the above decision of the Tribunal in the case of Reliance Industries Limited (2016 (6) TMI 96 - ITAT MUMBAI) we hold that the receipt from sale of software by the assessee from outside India is not taxable as royalty in terms of the articles of the Double Taxation Avoidance Agreement between the India and the Canada. Income from software supply and software maintenance/support services etc. - should be taxed under section 44D/44DA of the Act or under section 44BB? - Held that:- In the instant case, we observe that, the Assessing Officer himself has assessed the income from software maintenance/support services under the section 44BB of the Act, and now, it is contested before us that said income should fall under section 44D/44DA of the Act. In our considered opinion, once the Assessing Officer has accepted the taxability of income under section 44BB of the Act, he cannot be allowed to change the stand taken by him in the assessment order. Even otherwise, in view of the decision in the case of Oil and Natural Gas Corporation Limited v. CIT [2015 (7) TMI 91 - SUPREME COURT], if the substance of the contract/agreement is connected with the prospecting, extraction or production of mineral oil, the income has to be assessed under the provisions of section 44BB of the Act. In the case, the assessee supplied software and provided software maintenance/support services in respect of software supplied, which were to be utilised in exploration of mineral oil, and thus the relevant income from sale of software and software maintenance/support services has been rightly assessed under section 44BB of the Act. The amendment brought by the Finance Act, 2011 cannot be made effect from the retrospective effect as that it adversely affects the interest of the assessee. It is well settled law that an amendment to the taxing statute, if results in higher tax burden on the assessee then it is prospective in nature and not retrospective. We are not inclined to accept the contentions advanced on behalf of the Revenue, for the simple reason that the issue is squarely covered by the decision of the hon'ble Delhi High Court in the case of DIT-II v. OHM Ltd. [2012 (12) TMI 422 - DELHI HIGH COURT]. Assessment of income from sale of software to the entities engaged in exploration of mineral oil as taxable under section 44BB - Held that:- We find that supply, installation etc. of software used for oil and gas exploration has been held as taxable under section 44BB of the Act. In the present case, the software maintenance/support services has already been accepted by the assessee as falling under section 44BB of the Act. Since the software maintenance/support services was carried in respect of the software sold by the assessee, both the activity of sale of software and software maintenance/support services are composite contract to be considered under section 44BB of the Act. In the instant case, the learned Commissioner of Income-tax (Appeals) has assessed the supply of software and software maintenance/support services as taxable under section 44BB of the Act. As in the case of CIT v. Halliburton Offshore Services Inc. [2007 (9) TMI 230 - UTTARAKHAND HIGH COURT] held that the amount paid or payable whether in India or outside India have to be included for the purpose of computing global receipts under section 44BB of the Act - Decided against assessee.
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