TMI Blog2020 (3) TMI 969X X X X Extracts X X X X X X X X Extracts X X X X ..... hanged from April 01, 2011. It is now required to be considered whether the receipts in the hands of the assessee qualify to be royalty or not? If the answer to this question is in the affirmative, then in that event, the relevant provision would now be 44DA(1). CIT has also made certain observations that the assessee is not transferring the ownership in the software to the purchaser and is only granting a license to use the same. It has been further held that under Clause (v) of Explanation 2 to Section 9 (1) (vi) of the Act, transfer of all or any rights in respect of any copyright is Royalty . It has been held that if the software continues to be owned by the licensor, the use thereof would amount to Royalty . From the above it manifests that the contracts executed by the assessee are composite contracts and there is no bifurcation with respect to the nature of consideration relating to the services rendered. The assessee has not segregated its activities into supply of software and maintenance/support services. The entire income derived under the contracts was offered for taxation under section 44BB. Revenue in its note of arguments has contended that supply of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said DTAA before the Ld. CIT if it wishes to do so. Besides, in the event the answer to the question is in the affirmative, the assessee shall also be at liberty to assail such findings on merit, as we have refrained ourselves from determining whether the income of royalty is excluded from the definition under the Act. The writ petition is allowed in the above terms. - W.P.(C) 1370/2019 - - - Dated:- 13-3-2020 - JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA For the Petitioner : Mr. Piyush Kaushik, Advocate with Mr. Shailesh Kumar, Advocate For the Respondent : Mr. Ruchir Bhatia, Senior Standing Counsel JUDGMENT SANJEEV NARULA, J. 1. The present petition under Article 226 of the Constitution of India seeks inter alia quashing of the order dated 01.11.2018 passed by Commissioner of Income Tax (International Taxation)-3, New Delhi, under Section 264 of Income Tax Act, 1961 (hereinafter 'the Act') for AY 2012-13 (hereinafter 'subject AY') and consequential direction to the Respondent to assess petitioner's income under Section 44BB of the Act on presumptive basis. BRIEF FACTS: 2. Petitioner-assessee is a company incorporated under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising inter alia on account of providing services or facilities in connection with oil and gas operations. 5. The CIT declined to interfere with the final assessment order and rejected Petitioner s revision petition, primarily on the ground of maintainability, without dealing with the merits of the case. The writ petition [ W.P.(C) No. 6052/2017] impugning the said order was allowed, order of the CIT was quashed and the matter was remanded to the Respondent with a direction to examine the case on merits, with liberty to the Petitioner to challenge the same in case of an adverse outcome. Subsequently, vide order dated 01.11.2018, the case was decided on merits and Petitioner s claim of taxation on presumptive basis under Section 44BB was rejected, and the view of the AO that Petitioner s case would fall within the ambit of section 44DA of the Act was upheld. Aggrieved with the aforesaid order, the Petitioner has filed the present writ petition. SUBMISSIONS OF THE PARTIES 6. Mr Piyush Kaushik, learned counsel for the assessee, contended that the impugned order dated 01.11.2018 is fundamentally flawed, as the respondent has failed to appreciate the applicability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BB, and the position in law remains unaltered and undisturbed. In this regard, he places reliance on the decision of Director of Income Tax-II v. OHM Ltd [2012] 28 Taxmann 120 (Del) which approved the decision of the Authority for Advanced Ruling in Geofizyka Torun sp Z.O.O, In re : [2010] 320 ITR 268. He submits that in light of the aforesaid decision, there can be no ambiguity that the insertion of the Second Proviso to Section 44DA, as well as the amendment in the First Proviso to Section 44BB, introduced by the Finance Act, 2010 could only be interpreted to mean that services that are general in nature would fall within the purview of Section 44DA. The said amendments do not, in any manner, have the effect of altering or effacing the separate identity of Section 44BB. The general provisions should yield to the specific provision as has been held in the case of J.K. Cotton Spinning Weaving v. State of Uttar Pradesh Ors. [1961 AIR 1170 SC]. A proviso must be read harmoniously and cannot be divorced from the main section as laid down in the case of CIT v. Ajax Products Ltd. [55 ITR 741 SC] and therefore, an interpretation which advances the scheme of the Act should be adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax [1975] 101 ITR 234 (SC). Mr. Bhatia also relied upon the relevant excerpts of the Finance Bill, 2010, to highlight the legislative intent behind insertion of the Second Proviso to Section 44DA. 10. Insofar as the decision of this Court in OHM Ltd. (supra) is concerned, he submitted that a Special Leave Petition under Article 136 of the Constitution of India had been preferred by the Revenue against the said judgment. Mr Bhatia further contended that the decision of the Supreme Court in ONGC v CIT (supra) must be read in the context of the facts of that case. In the said case, the Supreme Court arrived at a finding that the services provided to the ONGC by contractors did not qualify as Fees for Technical Services in view of exclusionary part of Explanation 2 to Section 9(1)(vii). That being the case, the Court held that the services are to be taxed under Section 44BB. The question whether the services provided are royalty , or not, was not an issue before the Hon ble Court and hence, the said judgment is not applicable in the facts of the present case. Additionally, he submitted that ONGC (supra) applies to Assessment Years prior to the amendment of 2010 whereby the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with Income deemed to accrue or arise in India . The relevant extract of section 9(1)(vi) and 9(1)(vii) read as follows: 9(1) The following incomes shall be deemed to accrue or arise in India:- ................................ (vi) income by way of royalty payable by- (a) the Government ; or (b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on with the activities referred to in sub-clauses (i) to (iv), (iva) and (v). Explanation 3.-For the purposes of this clause, computer software means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data. Explanation 4.-For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred. Explanation 5.-For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not- (a) the possession or control of such right, property or information is with the payer; (b) such right, property or information is used directly by the payer; (c) the location of such right, property or information is in India. Explanation 6.-For the removal of doubts, it is hereby cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways maintained its stand that both set of provisions are special in nature which operate in their own clearly defined spheres; once a particular receipt of income takes on the character of Royalty/FTS as defined in section 9(1) (vi)/ 9(1) (vii), it cannot be considered for treatment under Section 44BB and has to be taxed under Section 115A/44DA of the Act. That being said, there are several judgments of this court, wherein it has been held that Section 44BB is a specific provision and incase the income falls within the ambit of Section 44DA(1) of the Act, it would be liable to be taxed under Section 44BB(1) of the Act, provided it was in connection with extraction or production of mineral oils. This conflict or inconsistency now stands resolved by virtue of the amendments introduced under the Finance Act, 2010. Though the insertions are stated to be clarificatory, however the rationale behind the introduction of the amendments has to be examined to appreciate the legislative intent envisioned under the Finance Act, 2010. 13. Section 44 BB is a special provision for computing profits and gains of a non-resident from business of providing services or facilities in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. Later, a special provision was introduced by way of Section 44BB vide Finance Act, 1987. However, even when 44D was appearing in the statute book, Section 44BB contained a proviso which excluded applicability of Section 44BB to cases that were covered by Section 44D. However, it is pertinent to note that there was no similar proviso appearing under Section 44D. Finance Act, 2003 provided a sunset clause to the operation of Section 44D with effect from 1st April 2003. Simultaneously, from the said date, a similar provision by way of Section 44DA was introduced. It is significant to note that both the provisions i.e. Section 44D as well as Section 44DA pertain to the same subject matter i.e. taxation of income by way of royalties and fees for technical services . 15. The aforesaid provisions further underwent change by way of amendments introduced by the Finance Act, 2010 w.e.f. 01.04.2011. By way of the said Act, a reference to Section 44DA was inserted in the proviso to sub Section (1) of Section 44BB. Simultaneously, a second proviso to sub Section (1) of Section 44DA was inserted to the following effect: Provided further that provisions of Section 44BB shall not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation in respect of income of a non-resident, including a foreign company, in the nature of royalty or fee for technical services, other than the income referred to in section 44DA i.e., income in the nature of royalty and fee for technical services which is not connected with the permanent establishment of the non-resident. Combined effect of the provisions of sections 44BB, 44DA and 115A is that if the income of a non-resident is in the nature of fee for technical services, it shall be taxable under the provisions of either section 44DA or section 115A irrespective 'of the business to which it relates. Section 44BB applies only in a case where consideration is for services and other facilities relating to exploration activity which are not in the nature of technical services. However, owing to judicial pronouncements, doubts have been raised regarding the scope of section 44BB vis-a-vis section 44DA as to whether fee for technical services. relating to the exploration sector would also be covered under the presumptive taxation provisions of section 44BB. In order to remove doubts and clarify the distinct scheme of taxation of income by way of fee for technical serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to Section 44BB, that existed during the relevant time. This is evident from the following observations made in the said judgment:- 8. A careful reading of the aforesaid provisions of the Act goes to show that under Section 44BB(1) in case of a non-resident providing services or facilities in connection with or supplying plant and machinery used or to be used in prospecting, extraction or production of mineral oils the profit and gains from such business chargeable to tax is to be calculated at a sum equal to 10% of the aggregate of the amounts paid or payable to such non-resident assessee as mentioned in Sub- section (2). On the other hand, Section 44D contemplates that if the income of a foreign company with which the government or an Indian concern had an agreement executed before 1.4.1976 or on any date thereafter the computation of income would be made as contemplated under the aforesaid Section 44D. Explanation (a) to Section 44D however specifies that fees for technical services as mentioned in Section 44D would have the same meaning as in Explanation 2 to Clause (vii) of Section 9(1). The said explanation as quoted above defines fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for acceptance. Equally important is the fact that the CBDT had accepted the said test and had in fact issued a circular as far back as 22.10.1990 to the effect that mining operations and the expressions mining projects or like projects occurring in Explanation 2 to Section 9(1) of the Act would cover rendering of service like imparting of training and carrying out drilling operations for exploration of and extraction of oil and natural gas and hence payments made under such agreement to a non-resident/foreign company would be chargeable to tax under the provisions of Section 44BB and not Section 44D of the Act. We do not see how any other view can be taken if the works or services mentioned under a particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. Keeping in mind the above provision, we have looked into each of the contracts involved in the present group of cases and find that the brief description of the works covered under each of the said contracts as culled out by the appellants and placed before the Court is correct. The said details are set out below. S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Analysis of data of wells to prepare a job design. 16. 1517 Geological study of the area and analysis of seismic information reports to design 2 dimensional seismic surveys. 17. 7226 Opinion on hydrocarbon resources and foreseeable potential. 18. 7227 Opinion on hydrocarbon resources and foreseeable potential. 19. 7230 Opinion on hydrocarbon resources and foreseeable potential. 20. 6016 Opinion on hydrocarbon resources and foreseeable potential. 21. 6008 Evaluation of ultimate resource potential and presentations outside India in connection with promotional activities for Joint Venture Exploration program. 22. 1531 Review of sub-surface well data, provide repair plan of wells and supervise repairs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject management. 41. 2796 Training in Safety Rating System and assistance in development and audit of Safety Management System. 42. 1239 To develop technical specification for 3D Seismic API modules of work and to prepare bid packages. 43. 1527 Supply supervision and installation of software which is used for analysis of flow rate of mineral oil to determine reservoir conditions. 44. 1523 Supply, installation and familiarization of software for processing seismic data. The above facts would indicate that the pith and substance of each of the contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. The dominant purpose of each of such agreement is for prospecting, extraction or production of mineral oils though there may be certain ancillary works contemplated thereunder. If that be so, we will have no hesitation in holding that the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 44BB is a special provision for computing the profits and gains of a non-resident in connection with the business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used, in the prospecting for, or extraction or production of mineral oils including petroleum and natural gas. Section 44DA is also a provision which applies to non-residents only. It is, however, broader and more general in nature and provides for assessment of the income of the non-resident by way of royalty or fees for technical services, where such non-resident carries on business in India through a permanent establishment situated therein or performs services from a fixed place of profession situated in India and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with the permanent establishment or fixed place of profession. Such income would be computed and assessed under the head business in accordance with the provisions of the Act, subject to the condition that no deduction would be allowed in respect of any expenditure or allowance which is not wholly or exclusivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of which the royalty or fees for technical services is paid should be effectively connected with the permanent establishment. Such a requirement has not been spelt out in Section 44BB; moreover, a flat rate of 10% of the revenues received by the non-resident for the specific services rendered by it are deemed to be profits from the business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by the non-resident for the business of the permanent establishment in India and for expenditure towards reimbursement of actual expense by the permanent establishment to its head office or to any of its other offices is allowed from the revenues received by the non-resident. Because of the different modes or methods prescribed in the two sections for computing the profits, it apparently became necessary to clarify the position by making necessary amendments. That perhaps is the reason for inserting the second proviso to sub- section (1) of Section 44DA and a reference to section 44DA in the proviso below sub-section (1) of Section 44BB. A careful perusal of both the provisos shows that they r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e occasion to consider the aforesaid case of Director of Income Tax v. OHM Ltd (Supra). In the said case, the Court upheld the contention advanced on behalf of the assessee that since it is engaged in business of providing services in connection with prospecting for mineral oils, its income, even if it falls within the ambit of Section 44DA (1) of the Act, would be taxable under Section 44BB (1). However, at the same time, the court considered the effect of the amendments introduced by the Finance Act, 2010 and held as under: 27. The contention advanced on behalf of the Revenue that fees for technical services earned by a foreign company in respect of a contract which is connected with the PE of such foreign company in India would be taxable under Section 44DA(1) of the Act, irrespective of whether the same is connected with extraction/production of mineral oils, cannot be accepted. By virtue of Finance Act, 2003, such income was excluded from the ambit of Section 115A(1)(b) of the Act w.e.f. 01.04.2004. Although, with effect from said date such income was taxable under Section 44DA(1) of the Act but in certain cases where such income was earned by the assessee by carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the income of the assessee would be computed under Section 44BB(1) of the Act. However, if such conditions are not satisfied then the income tax payable by the appellant would have to be computed in accordance with Section 115A(1)(b) of the Act. 20. The aforesaid observations, in our view, rightly interpret the position in law. For that matter, the Petitioner is misinterpreting the earlier judgment of this Court in Director of Income Tax v. OHM (supra), to contend that Section 44BB being a specific provision will override the provisions of section 44DA of the Act. Section 44BB of the Act qualifies a business activity whilst section 44DA applies to the nature of income. Even in OHM Ltd. (supra), the Court has taken a view that is in concurrence with our opinion. In the said judgment, the Court in para 12 notes as under: 12. The second proviso to sub-section (1) of Section 44DA inserted by the Finance Act, 2010 w.e.f. 01.04.2011 makes the position clear. Simultaneously a reference to Section 44DA was inserted in the proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that the non-resident or the foreign company should car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will be deemed to be the profits as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w.e.f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act and not section 44DA. In the above extracted portion, the court has held that in case the services are in the nature of Royalty or FTS so as to fall under section 44DA, then an assessee is rendering such services as provided in section 44BB, he cannot claim the benefit of being assessed on the basis that 10 percent of the revenue will be deemed to be the profits as provided in section 44BB. This legal viewpoint stands reaffirmed and reinforced in PGS Exploration (Norway) AS v. Additional Director of Income Tax (supra). 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exploitation of oil and natural gas. 3. In view of the above opinion, the consideration for such services will not be treated as fees for technical services for the purpose of Explanation 2 to section 9(1)(vii) of the Income-tax Act, 1961. Payments for such services to a foreign company, therefore, will be income chargeable to tax under the provisions of section 44BB of the Income-tax Act, 1961 and not under the special provision for the taxation of fees for technical services contained in section 115A, read with section 44D of the Income-tax Act, 1961. This definition of FTS remains unchanged and circular No. 1862 dated 22.10.1990 is still in force. Thus, in a nutshell, if the services provided by the assessee constitute services for mining or like project , the consideration therefore it would be excluded from the scope of fees for technical services . It is well settled that when there are two provisions in an enactment which cannot be reconciled with each other, the doctrine of harmonious construction should be applied and attempt should be so interpret the provisions, if possible, giving effect to both. It is the duty of the courts to avoid a head on clash bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the income on account of receipts from provision of software enabled solutions to the oil and gas industry along with providing annual maintenance services of the software is in the nature of fees for technical services/ royalty payments under section 9(1)(vii)/9(1)(vi) of the Income Tax Act, 1961 (the Act ). 25. The CIT considered the contentions raised by the Petitioner and rejected the aforesaid ground inter alia holding as under: On a comprehensive consideration of the entire conspectus of the factual matrix of the case and the extant legal position on the issues involved, there is no merit in Ground Nos. 1 2 of the assessee i.e. Claim of applicability of Section 4488 to the assessee's receipts instead of Section 44DA adopted by the Assessing Officer estimating income @ 25% of the Gross revenue/ receipts and is therefore rejected. The natures of services rendered are not even wholly connected to drilling and prospecting. The logic of the ONGC decision does not apply in this case. In any case, the 44DA adopted by the Assessing Officer estimating income @25% of the Gross revenue/ receipts and is therefore rejected. The natures of services rendered are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are unable to find any rationale in this reasoning. In the impugned order, it has been noted that the software supplied by Petitioner helps to ascertain the drilling spot where there is a maximum probability for finding oil. The impugned order also records that the assessee is regularly hired by Oil and Gas exploration companies such as ONGC; Reliance Industries Ltd. Gujarat State Petroleum Corporations; Oil India Ltd etc. for availing the aforesaid services. It has been further noted in para 4.3 (a) that the services of the assessee prima facie appear to be covered by judgment of the Apex Court in the case of ONGC v. CIT (supra), as it is one of the 44 work/activity identified by the Court for applying Section 44BB instead of Section 44D . Reference here may be made to the judgment of the Supreme Court in the case of ONGC (supra). In the said case, the Court applied the doctrine of pith and substance in respect of each contract/agreement, to ascertain whether the dominant purpose of the agreements was prospecting, extraction or production of mineral oils. On that basis, the Court held that the payments made by ONGC and received by non-resident assesses or foreign companies unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-resident where the services are of the type which do not fall under that section, but are more general in nature so as to fall under Section 44DA. Similarly, the second proviso to sub-section (1) of Section 44DA can only be interpreted to mean that where the services are general in nature and fall under the sub-section read with Explanation 2 to Section 9(1)(vii) of the Act, then an assessee rendering such services as provided in Section 44BB cannot claim the benefit of being assessed on the basis that 10% of the revenues will be deemed to be the profits as provided in Section 44BB. In other words, the amendment made by the Finance Act, 2010 w.e.f. 01.04.2011 in both the sections, cannot have the effect of altering or effacing the fundamental nature of both the provisions or their respective spheres of operation or to take away the separate identity of Section 44BB. We do not, therefore, see how these amendments can assist the Revenue's contention in the present case, put forward by the learned Senior Standing Counsel. We, therefore, agree with the AAR that in the present case the profits shall be computed in accordance with the provisions of section 44BB of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 454) held that the expression 'in respect of used in Explanation 2 denotes the intention of the Parliament to give a broader meaning and wider connotation that covered all the income from transfer of all or any of the rights in respect of a copyright. The HC also observed that when the meaning of the words used are clear, unambiguous, merely because it is a fiscal legislation, the meaning cannot be narrowed down and it cannot be interpreted so as to give benefit to the assessee only. Then it would be re- writing the section, under the guise of interpreting a fiscal legislation, which is totally impermissible in law. When the legislature has advisedly used the words 'in respect of', the intention is clear and manifest, the said phrase being capable of a broader meaning, the same is used in the section to bring within the tax. net all the incomes from the transfer of all or any of the rights in respect of a copyright. Thus, it was held that license fee for use of software amount to transfer of all or any of the rights in respect of a copyright. m) When licence is granted to allow use of the software by making copy of the same and to store it in the hard disk of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court has specifically dissented from the views expressed by the Karnataka High Court. In this regard, reliance has been placed on the decision of this Court in CIT v. Alcatel Lucent Canada (2015 372 ITR 476 (Del); CIT v. ZTE Corporation (2017) 392 ITR 80 (Del); Income Tax v. Ericsson A.B. 343 ITR 470 (Del) and Director of Income Tax v. Intrasoft Ltd. (2014) 220 Taxman 273 (Del). We need not go into this vexed question at this stage because of lack of clarity on facts. 30. In the assessment order, the assessing officer has taken note of the contracts entered into by the Petitioner with other parties. A perusal of the same indicates that such contracts are in the nature of annual maintenance contract of upgradation, maintenance in support of software licenses; supply of software; AMC for software. The nature of activity/scope of services under the contract executed by the Petitioner with various companies also indicates the same position. The relevant portion of the order reads as under:- The nature of activities/scope of work under the contract with various companies is found to be as follows:- a. Under the contracts/service orders With Calm India Ltd scope of work inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support services of paradigm software. The assessee is also providing services of its engineers who are deputed to site of OIL in India for the contract and maintenance services 31. From the above it manifests that the contracts executed by the assessee are composite contracts and there is no bifurcation with respect to the nature of consideration relating to the services rendered. The assessee has not segregated its activities into supply of software and maintenance/support services. The entire income derived under the contracts was offered for taxation under section 44BB. Revenue in its note of arguments has contended that supply of software is royalty and other services are FTS and accordingly Petitioner is liable to pay tax under Section 44DA of the Act. Whether the services of updating the software/renewal of license or warranty services or maintenance of software are inextricably and essentially linked to the supply of the software and are ancillary services is a question of fact that would require determination after examining the dominant purpose of such contracts. In our opinion, there is no factual clarity on this aspect. We do not find any such distinction/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of foreign companies. -Notwithstanding anything to the contrary contained in sections 28 to 44C, in the case of an assessee, being a foreign company, - (a) the deductions admissible under the said sections in computing the income by way of royalty or fees for technical services received from an India concern in pursuance of an agreement made by the foreign company with the Indian concern before the 1st day of April, 1976, shall not exceed in the aggregate twenty per cent. of the gross amount of such royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property; (b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received from an Indian concern in pursuance of an agreement made by the foreign company with the Indian concern after the ..... 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