IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 04.09.2019 Pronounced on: 13.03.2020 W.P.(C) 1370/2019 PARADIGM GEOPHYSICAL PTY LTD. Petitioner Through: Mr. Piyush Kaushik, Advocate with Mr. Shailesh Kumar, Advocate. versus COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION)-3, NEW DELHI Respondent Through: Mr. Ruchir Bhatia, Senior Standing Counsel. CORAM: JUSTICE VIPIN SANGHI JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J. 1. present petition under Article 226 of Constitution of India seeks inter alia quashing of 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 Respondent to assess petitioner's income under Section 44BB of Act on presumptive basis. Signature Not Verified Digitally Signed By: SAPNA SETHI W.P.(C) 1370/2019 Page 1 of 50 Signing Date:13.03.2020 15:56:04 BRIEF FACTS: 2. Petitioner-assessee is company incorporated under laws of Australia and is tax-resident of that country. It is engaged in business of developing and providing customized software enabled solutions and annual maintenance services. solutions provided by Petitioner are used by oil and gas industry in relation to excavation, extraction, production activities and seismic analysis. 3. Petitioner opted to be taxed on presumptive basis under section 44BB(1) of Act, whereby 10% of aggregate of receipts is deemed to be profits and gains of business and is subjected to tax. assessee filed its return of for assessment year 2012-2013, declaring total income of Rs. 19,71,61,430/- arising inter alia, from business of providing services or facilities in connection with extraction or production of mineral oils. case was picked up for scrutiny and notice under Section 143(2)/142(1) was issued by Assessing Officer (hereinafter, AO). Eventually, AO held that in accordance with terms of contract, nature of services provided by Petitioner fell within purview of Royalty/ Fees for Technical Services (hereinafter, referred to as FTS) and is liable to be taxed under section 44DA instead of section 44BB, and proposed to compute total income of Petitioner at Rs. 4,92,90,360/- as against total income of Rs. 1,97,16,140, offered to tax by Petitioner. On 05.03.2015, draft assessment order was issued by AO under Section 143(3)/144C(1) of Act proposing to tax revenues received by Petitioner under section 44DA of Act, estimating 25% of gross receipts as business Signature Not Verified Digitally Signed By: SAPNA SETHI W.P.(C) 1370/2019 Page 2 of 50 Signing Date:13.03.2020 15:56:04 income taxable under section 28 to 43C of Act. Thereafter, final assessment order was passed on 11.05.2015, under Section 44C(3)(b)/143(3), confirming addition/adjustment proposed in Draft Assessment Order. 4. Petitioner neither filed any objection before Dispute Resolution Panel against Draft Assessment Order, nor did it file appeal before Commissioner of Income Tax (Appeal). Instead, it chose to exercise alternate remedy by filing Revision Petition under Section 264 of Act before Commissioner of Income Tax (International Taxation)-3 New Delhi (hereinafter, CIT), claiming that Petitioner was wrongfully denied benefit of assessment under Section 44BB special provision under Act for computing income arising inter alia on account of providing services or facilities in connection with oil and gas operations. 5. CIT declined to interfere with final assessment order and rejected Petitioner s revision petition, primarily on ground of maintainability, without dealing with merits of case. writ petition [W.P.(C) No. 6052/2017] impugning said order was allowed, order of CIT was quashed and matter was remanded to Respondent with direction to examine case on merits, with liberty to Petitioner to challenge same in case of adverse outcome. Subsequently, vide order dated 01.11.2018, case was decided on merits and Petitioner s claim of taxation on presumptive basis under Section 44BB was rejected, and view of AO that Petitioner s case would fall within ambit of section Signature Not Verified Digitally Signed By: SAPNA SETHI W.P.(C) 1370/2019 Page 3 of 50 Signing Date:13.03.2020 15:56:04 44DA of Act was upheld. Aggrieved with aforesaid order, Petitioner has filed present writ petition. SUBMISSIONS OF PARTIES 6. Mr Piyush Kaushik, learned counsel for assessee, contended that impugned order dated 01.11.2018 is fundamentally flawed, as respondent has failed to appreciate applicability of decision of Supreme Court in case of Oil and Natural Gas Corporation Ltd (ONGC) v. CIT (2015) 376 ITR 306 SC, wherein it was held by Supreme Court that income falling within ambit of Section 44D of Act would be liable to be taxed under Section 44BB(1) of Act, if it was in connection with extraction or production of mineral oils, since Section 44BB is special provision. Mr. Kaushik further elaborated his submissions by making detailed analysis of decision of Supreme Court in case of ONGC v. Commissioner of Income Tax & Anr (supra). He submitted that in said case, court considered identical issue as to whether such services/facilities fall within purview of Section 44BB, or Section 44D of Act. nature of services involved in said case comprised of following: 1. Carrying out seismic surveys and drilling for oil and gas. 2. Services starting/re-starting/enhancing production of oil and gas from wells 3. Services for prospecting for exploration of oil and or gas Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 4 of 50 Signing Date:13.03.2020 15:56:04 4. Planning and supervision of repair of wells 5. Repair, Inspection or Equipment used in exploration, extraction or production of oil and gas 6. Imparting Training 7. Consultancy in regard to exploration of oil and gas 8. Supply, Installation, etc. of software used for oil and gas exploration (Emphasis supplied) 7. Mr. Kaushik argues that Supreme Court after detailed examination of nature of services has held that if services are inextricably linked with prospecting and extraction of mineral oil, Section 44BB would apply and Petitioner s case is squarely covered by said decision. 8. Mr. Kaushik submits that, indisputably, impugned order acknowledges that Petitioner is engaged in business of developing and providing software-enabled solutions to oil and gas industry, inter alia, for undertaking seismic analysis; and also providing customized software solutions that help in meeting specific business objectives of entities engaged in oil exploration. He submitted that although provision has undergone amendment yet aforesaid decision of Supreme Court is pertinent, notwithstanding fact that it was rendered in context of unamended provisions. amendments to Act do not obliterate intent of special provision- Section 44BB, and position in law remains unaltered and undisturbed. In this regard, he places reliance on decision of Director of Income Tax-II Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 5 of 50 Signing Date:13.03.2020 15:56:04 v. OHM Ltd [2012] 28 Taxmann 120 (Del) which approved decision of Authority for Advanced Ruling in Geofizyka Torun sp Z.O.O, In re : [2010] 320 ITR 268. He submits that in light of aforesaid decision, there can be no ambiguity that insertion of Second Proviso to Section 44DA, as well as amendment in First Proviso to Section 44BB, introduced by Finance Act, 2010 could only be interpreted to mean that services that are general in nature would fall within purview of Section 44DA. said amendments do not, in any manner, have effect of altering or effacing separate identity of Section 44BB. general provisions should yield to specific provision as has been held in case of J.K. Cotton Spinning & Weaving v. State of Uttar Pradesh & Ors. [1961 AIR 1170 SC]. proviso must be read harmoniously and cannot be divorced from main section as laid down in case of CIT v. Ajax Products Ltd. [55 ITR 741 SC] and therefore, interpretation which advances scheme of Act should be adopted. 9. Per contra, Mr Ruchir Bhatia, learned counsel appearing for Revenue, contended that Petitioner engages in supply of software services that develop 2D/3D images and graphs of seismic marine data, as well as maintenance for such software. These activities are carried out at backend and can be done from any place. There is no need for this software to be deployed on-site or drilling-site and, therefore, Petitioner cannot derive benefit of Section 44BB of Act. Further, Petitioner is not transferring ownership in software to purchasers vis-a-vis Oil India ltd. (OIL), ONGC, RIL etc. It only grants licence to use said software as per Clause 1, Section II of Contract No. Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 6 of 50 Signing Date:13.03.2020 15:56:04 CONT/GL/GPHY/275/10-11 dated 14.7.2011 between petitioner and OIL, Govt of India enterprise. He also refers to Clause 4 of Work order No. 048/31035461 dated 5.4.2011 from RIL, (Software License Agreement) to purchase Order No. 048/7272379 from RIL. Thus, services provided by Petitioner fall under broad definition of Royalty which is defined under Explanation 2 to section 9(1) clause (vi) and, consequently, same will be assessed under Section 44DA. It was further submitted that supply of software was held to be Royalty by High Court of Karnataka in case of Commissioner of Income Tax v. Synopsis International Old Ltd. (2012) 28 taxmann.co 162 (Kar). He also submitted that Section 44BB was inserted in Act w.e.f. 01.04.1983. Section 44DA was added in year 2004 and subsequently, Second Proviso was inserted by virtue of Finance Act, 2010 w.e.f. 01.04.2011 whereby it was stipulated that provisions of Section 44BB shall not apply in respect of income falling under provisions of Section 44DA . intention behind insertion of Second Proviso to Section 44DA was to curtail applicability of Section 44BB. Any interpretation of section 44BB that will render section 44DA as superfluous, must be avoided. He submitted that it is settled legal position that any interpretation which renders provision otiose or redundant is to be avoided, and provision should give meaningful interpretation. In support of this submission, he placed reliance upon Commissioner of Wealth Tax v. Kripashankar Dayashankar Worah [1971] 81 ITR 763 and Sole Trustee, Loka Shikshana Trust v. Commissioner of Income Tax [1975] 101 ITR 234 (SC). Mr. Bhatia also relied upon relevant excerpts of Finance Bill, 2010, to highlight legislative intent behind insertion of Second Proviso to Section 44DA Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 7 of 50 Signing Date:13.03.2020 15:56:04 10. Insofar as decision of this Court in OHM Ltd. (supra) is concerned, he submitted that Special Leave Petition under Article 136 of Constitution of India had been preferred by Revenue against said judgment. Mr Bhatia further contended that decision of Supreme Court in ONGC v CIT (supra) must be read in context of facts of that case. In said case, Supreme Court arrived at finding that services provided to 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 case, Court held that services are to be taxed under Section 44BB. question whether services provided are royalty , or not, was not issue before Hon ble Court and hence, said judgment is not applicable in facts of present case. Additionally, he submitted that ONGC (supra) applies to Assessment Years prior to amendment of 2010 whereby second proviso to Section 44DA was inserted w.e.f. 01.04.2011. present case is not weighed down by ONGC case (supra). ANALYSIS & CONCLUSION: LEGAL POSITION VIZ. SECTION 44BB AND SECTION 44DA AFTER AMENDMENT INTRODUCED UNDER FINANCE ACT, 2010. 11. pivotal controversy in present case surrounds interpretation of Section 44BB and 44DA of Act. These provisions have undergone amendments over years, last one being introduced by Finance Act, 2010. Since assessee has argued at length that this legal position remains unaltered, we feel that this aspect in law needs to be clarified as it Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 8 of 50 Signing Date:13.03.2020 15:56:04 would also be germane for decision in present case. It is, thus, imperative to first examine effect and consequence of said amendments, particularly to determine if legal position has undergone any change with respect to applicability of provisions, after effective date i.e. April 01, 2011 since return of income filed by Petitioner pertains to assessment year 2012-13. For sake of convenience, relevant provisions are reproduced hereunder: 1 "Special provision for computing profits and gains in connection with business of exploration, etc., of mineral oils. 44BB. (1) Notwithstanding anything to contrary contained in sections 28 to 41 and sections 43 and 43A, in case of assessee, [being non-resident]2, engaged in business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in prospecting for, or extraction or production of, mineral oils, sum equal to ten per cent of aggregate of amounts specified in sub-section (2) shall be deemed to be profits and gains of such business chargeable to tax under head Profits and gains of business or profession : Provided that this sub-section shall not apply in case where provisions of section 42 or section 44D or [section 44DA or]3 section section 115A or section 293A apply for purposes of computing profits or gains or any other income referred to in those sections. 1 Inserted by Finance Act, 1987 w.r.e.f. 1-4-1983 2 Inserted by Finance Act, 1988 w.r.e.f. 1-4-1983 3 Inserted by Finance Act, 2010 w.e.f 1-04-2011 Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 9 of 50 Signing Date:13.03.2020 15:56:04 (2) amounts referred to in sub-section (1) shall be following, namely :-- (a) amount paid or payable (whether in or out of India) to assessee or to any person on his behalf on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in prospecting for, or extraction or production of, mineral oils in India; and (b) amount received or deemed to be received in India by or on behalf of assessee on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), assessee may claim lower profits and gains than 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 report of such audit as required under section 44AB, and thereupon Assessing Officer shall proceed to make assessment of total income or loss of assessee under sub-section (3) of section 143 and determine sum payable by, or refundable to, assessee. Explanation.--For purposes of this section,-- (i) plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for purposes of said business; (ii) mineral oil includes petroleum and natural gas. Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 10 of 50 Signing Date:13.03.2020 15:56:04 "Special provision for computing income by way of royalties, etc., in case of non-residents.4 44DA. (1) income by way of royalty or fees for technical services received from Government or Indian concern in pursuance of agreement made by non-resident (not being company) or foreign company with Government or Indian concern after 31st day of March, 2003, where such non- resident (not being company) or foreign company carries on business in India through permanent establishment situated therein, or performs professional services from fixed place of profession situated therein, and right, property or contract in respect of which royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as case may be, shall be computed under head Profits and gains of business or profession in accordance with provisions of this Act : Provided that no deduction shall be allowed, -- (i) in respect of any expenditure or allowance which is not wholly and exclusively incurred for business of such permanent establishment or fixed place of profession in India; or (ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by permanent establishment to its head office or to any of its other offices : [Provided further that provisions of section 44BB shall not apply in respect of income referred to in this section.]5 Therefore, if, inter alia, Section 44DA applies for purpose of computing profits or gains or any other income referred in section 44DA, then Sub Section (1) of Section 44BB would not apply. nature of income dealt with by Section 44DA is either Royalty, or Fees for Technical Services. 4 Inserted by Finance Act, 2003 w.e.f 1-04-2004 5 Inserted by Finance Act, 2010 w.e.f 1-04-2011 Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 11 of 50 Signing Date:13.03.2020 15:56:04 Thus, it needs examination whether nature of income derived by Petitioner either qualifies as "Royalty" or "Fees for Technical Services". 12. Section 9 of Act deals with "Income deemed to accrue or arise in India". relevant extract of section 9(1)(vi) and 9(1)(vii) read as follows: "9(1) following incomes shall be deemed to accrue or arise in India:- ................................ (vi) income by way of royalty payable by (a) Government ; or (b) person who is resident, except where royalty is payable in respect of any right, property or information used or services utilised for purposes of business or profession carried on by such person outside India or for purposes of making or earning any income from any source outside India ; or (c) person who is non-resident, where royalty is payable in respect of any right, property or information used or services utilised for purposes of business or profession carried on by such person in India or for 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 income by way of royalty as consists of lump sum consideration for transfer outside India of, or 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, if such income is payable in pursuance of agreement made before 1st day of April, 1976, and agreement is approved by Central Government : Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 12 of 50 Signing Date:13.03.2020 15:56:04 Provided further that nothing contained in this clause shall apply in relation to so much of income by way of royalty as consists of lump sum payment made by person, who is resident, for transfer of all or any rights (including granting of licence) in respect of computer software supplied by non-resident manufacturer along with computer or computer-based equipment under any scheme approved under Policy on Computer Software Export, Software Development and Training, 1986 of Government of India. " Explanation 2 (to 6) to Section 9(1)(vi) are relevant and read as follows: "Explanation 2. For purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be income of recipient chargeable under head "Capital gains") for (i) transfer of all or any rights (including granting of licence) in respect of patent, invention, model, design, secret formula or process or trade mark or similar property ; (ii) imparting of any information concerning working of, or use of, patent, invention, model, design, secret formula or process or trade mark or similar property ; (iii) use of any patent, invention, model, design, secret formula or process or trade mark or similar property ; (iv) imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ; (iva) use or right to use any industrial, commercial or scientific equipment but not including amounts referred to in section 44BB; (v) transfer of all or any rights (including granting of licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for sale, distribution or exhibition of cinematographic films ; or Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 13 of 50 Signing Date:13.03.2020 15:56:04 (vi) rendering of any services in connection with activities referred to in sub-clauses (i) to (iv), (iva) and (v). Explanation 3. For 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 removal of doubts, it is hereby clarified that 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 computer software (including granting of licence) irrespective of medium through which such right is transferred. Explanation 5. For removal of doubts, it is hereby clarified that royalty includes and has always included consideration in respect of any right, property or information, whether or not (a) possession or control of such right, property or information is with payer; (b) such right, property or information is used directly by payer; (c) location of such right, property or information is in India. Explanation 6. For removal of doubts, it is hereby clarified that expression "process" includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down- linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret;" (Emphasis supplied) Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 14 of 50 Signing Date:13.03.2020 15:56:04 Section 9(1)(vii) deals with "income by way of fees for technical services" and reads as follows: "(vii) income by way of fees for technical services payable by (a) Government ; or (b) person who is resident, except where fees are payable in respect of services utilised in business or profession carried on by such person outside India or for purposes of making or earning any income from any source outside India ; or (c) person who is non-resident, where fees are payable in respect of services utilised in business or profession carried on by such person in India or for purposes of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of agreement made before 1st day of April, 1976, and approved by Central Government. Explanation 1. For purposes of foregoing proviso, agreement made on or after 1st day of April, 1976, shall be deemed to have been made before that date if agreement is made in accordance with proposals approved by Central Government before that date. Explanation 2. For purposes of this clause, "fees for technical services" means any consideration (including any lump sum consi-deration) for rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by recipient or consideration which would be income of recipient chargeable under head "Salaries"." interplay between Section 44DA(1) and 44BB(1) of Act has been Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 15 of 50 Signing Date:13.03.2020 15:56:04 subject matter of several judgments. We need not engage ourselves with elaborate analysis of said provisions, as they existed prior to amendments, and it would suffice to note that conflict between two provisions has been noticed in several decisions. Revenue has always maintained its stand that both set of provisions are special in nature which operate in their own clearly defined spheres; once particular receipt of income takes on 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 Act. That being said, there are several judgments of this court, wherein it has been held that Section 44BB is specific provision and incase income falls within ambit of Section 44DA(1) of Act, it would be liable to be taxed under Section 44BB(1) of Act, provided it was in connection with extraction or production of mineral oils. This conflict or inconsistency now stands resolved by virtue of amendments introduced under Finance Act, 2010. Though insertions are stated to be clarificatory, however rationale behind introduction of amendments has to be examined to appreciate legislative intent envisioned under Finance Act, 2010. 13. Section 44 BB is special provision for computing profits and gains of non-resident from business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used in prospecting for or extraction or production of mineral oils, including petroleum and natural gas. Section 44DA is broader and more general in nature and provides for assessment of income of non-resident by way of royalty or fees for technical services, where such non-resident carries on Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 16 of 50 Signing Date:13.03.2020 15:56:04 business in India through permanent establishment situated therein, or performs services from fixed place of profession situated in India and right, property or contract in respect of which royalties or fees for technical services are paid is effectively connected with permanent establishment or fixed place of profession situated in India. One more distinction between sections 44 DA and 44 BB is that, in section 44 BB one does not find any reference to permanent establishment in India and services contemplated therein are more specific than what is contemplated in section 44 DA. Thus, Section 44BB is special provision in so far as it relates to applicability of provision in context of specified services. Section 44DA applies where such non-resident carries on business in India through permanent establishment stipulated therein or performs services from fixed place of profession, such income shall be computed under head profit and gains of business or profession in accordance with provisions of Act, subject to condition that no deduction shall be allowed in respect of any expenditure or allowance which is not wholly or exclusively incurred for business of such permanent establishment or fixed place of profession in India or in respect of amounts, if any, paid by permanent establishment to its head office or to any of its other offices. Section 115A of Act provides rate of taxation in respect of income of non-resident, in nature of royalty or fees for technical services, other than income referred in Section 44DA i.e. income in nature of royalty and fees for technical services which is not connected with permanent establishment of non-resident. 14. There is another Section that needs to be referred, for sake of Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 17 of 50 Signing Date:13.03.2020 15:56:04 comprehensive understanding i.e. Section 44D of Act, inserted in first place vide Finance Act, 19766 for taxability of income in nature of royalty and fee for technical services. Later, special provision was introduced by way of Section 44BB vide Finance Act, 1987. However, even when 44D was appearing in statute book, Section 44BB contained 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 6 For sake of reference, same is reproduced as under: 44D. Special provisions for computing income by way of royalties, etc., in case of foreign companies. -Notwithstanding anything to contrary contained in sections 28 to 44C, in case of assessee, being foreign company, - (a) deductions admissible under said sections in computing income by way of royalty or fees for technical services received from India concern in pursuance of agreement made by foreign company with Indian concern before 1st day of April, 1976, shall not exceed in aggregate twenty per cent. of gross amount of such royalty or fees as reduced by so much of gross amount of such royalty as consists of lump sum consideration for transfer outside India of, or 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 said sections in computing income by way of royalty or fees for technical services received from Indian concern in pursuance of agreement made by foreign company with Indian concern after 31st day of March, 1976. Explanation : For purposes of this section, - (a) "fees for technical services" shall have same meaning as in Explanation to clause (vii) of sub-section (1) of section 9; (b) "foreign company" shall have same meaning as in section 80B; (c) "royalty" shall have same meaning as in Explanation to clause (vi) of sub-section (1) of section 9; (d) royalty received from Indian concern in pursuance of agreement made by foreign company with Indian concern after 31st day of March, 1976, shall be deemed to have been received in pursuance of agreement made before 1st day of April, 1976, if such agreement is deemed, for purposes of proviso to clause (vi) of sub-section (1) of section 9, to have been made before 1st day of April, 1976.. Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 18 of 50 Signing Date:13.03.2020 15:56:04 sunset clause to operation of Section 44D with effect from 1st April 2003. Simultaneously, from said date, similar provision by way of Section 44DA was introduced. It is significant to note that both provisions i.e. Section 44D as well as Section 44DA pertain to same subject matter i.e. taxation of income by way of royalties and fees for technical services . 15. aforesaid provisions further underwent change by way of amendments introduced by Finance Act, 2010 w.e.f. 01.04.2011. By way of said Act, reference to Section 44DA was inserted in proviso to sub Section (1) of Section 44BB. Simultaneously, second proviso to sub Section (1) of Section 44DA was inserted to following effect: Provided further that provisions of Section 44BB shall not apply in respect of income referred to in this Section . 16. Keeping in mind legislative history of amendments in two provisions, aforesaid amendments are significant and changed position with respect to applicability of said provisions. taxing statute is to be construed strictly. position that existed prior to amendments was different. There was no proviso which restricted applicability of Section 44BB in respect of income falling within scope of Section 44DA (1) of Act. However, now that proviso has been inserted, it has fundamentally restricted applicability of section 44BB. This proviso has to be given due consideration and meaning, recognizing legislative intent. plain reading of section 44BB (1) shows that it applies to assessee who is engaged in business of providing services or facilities in connection with, or supplying plant and machinery Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 19 of 50 Signing Date:13.03.2020 15:56:04 on hire use, or to be used, in prospecting for, or extraction or production of mineral oils. However, proviso thereto carves out exception that sub-section shall not apply in case where provisions of section 44DA apply for purpose of computing profits or gains or any other income referred to in those sections. Further, reading of section 44DA makes it clear that it applies to character of income which is in nature of royalty or fees for technical services. legislative intent behind amendment is also evident from memorandum to Finance Bill 2010 which reads as under: Under existing provisions contained in section 44BB(1) of Income-tax Act, income of non-resident taxpayer who is engaged in business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in prospecting for, or extraction or production of, mineral oils is computed at ten per cent of aggregate of amounts paid. Section 44DA provides procedure for computing income of non-resident, including foreign company, by way of royalty or fee for technical services, in case right, property or contract giving rise to such income are effectively connected with permanent establishment of said non-resident. This income is computed as per books of account maintained by assessee. Section 115A provides rate of taxation in respect of income of non-resident, including foreign company, in nature of royalty or fee for technical services, other than income referred to in section 44DA i.e., income in nature of royalty and fee for technical services which is not connected with permanent establishment of non-resident. Combined effect of provisions of sections 44BB, 44DA and Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 20 of 50 Signing Date:13.03.2020 15:56:04 115A is that if income of non-resident is in nature of fee for technical services, it shall be taxable under provisions of either section 44DA or section 115A irrespective 'of business to which it relates. Section 44BB applies only in case where consideration is for services and other facilities relating to exploration activity which are not in nature of technical services. However, owing to judicial pronouncements, doubts have been raised regarding scope of section 44BB vis-a-vis section 44DA as to whether fee for technical services. relating to exploration sector would also be covered under presumptive taxation provisions of section 44BB. In order to remove doubts and clarify distinct scheme of taxation of income by way of fee for technical services, it is proposed to amend proviso to section 44BB so as to exclude applicability of section 44BB to income which is covered under section 44DA. Similarly, section 44DA is also proposed to be amended to provide that provisions of section 44BB shall not apply to income covered under section 44DA. These amendments are proposed to take effect from 1st April 2011 and will, accordingly, apply in relation to assessment year 2011-12 and subsequent years. This proviso reinforces legislative intent to carve out exception to character of income referred to in this section i.e. royalty and fees for technical services. principles relating to interpretation of statute, emphatically lay down that statute should be interpreted to preserve legislative intent. reading of overall scheme of section 44BB and 44DA leaves no manner of doubt that section 44BB applies if assessee is engaged in business of providing services or facilities in prospecting for, or extraction or production of minerals oils. However, if income earned by such assessee takes color of royalty or FTS, then computation for Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 21 of 50 Signing Date:13.03.2020 15:56:04 purposes of determining "profits and gains of business or profession" is to be done as per provisions of section 44DA of Act. Therefore, now in current scenario if income of assessee is Royalty or FTS, then same would be taxed under Section 9(1)(vi)/(vii) read with Section 115A or 44DA, as case may be. Judgments relied upon by Parties 17. Now, let us reflect upon case laws relied upon by parties. In Oil and Natural Gas Corporation (ONGC) v. Commissioner of Income Tax and Anr. (supra), pith and substance test was applied in respect of position that existed prior to amendments taken note of hereinabove and, therefore, said judgment does not deal with situation that we are faced with on question of interplay of two provisions. Furthermore, in said case, Supreme Court concluded that services provided to ONGC by Contractors in batch of appeals do not qualify as FTS, in view of exclusionary part of Explanation 2 to Section 9 (1) (vii). In that view of matter, Court held that services are to be taxed under Section 44BB. Court, thus did not have occasion to consider import, effect and purpose of proviso to Section 44BB, that existed during relevant time. This is evident from following observations made in said judgment:- "8. careful reading of aforesaid provisions of Act goes to show that under Section 44BB(1) in case of 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 profit and gains from such business chargeable to tax is to be calculated at sum equal to 10% of aggregate of amounts paid or Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 22 of 50 Signing Date:13.03.2020 15:56:04 payable to such non-resident assessee as mentioned in Sub- section (2). On other hand, Section 44D contemplates that if income of foreign company with which government or Indian concern had agreement executed before 1.4.1976 or on any date thereafter computation of income would be made as contemplated under aforesaid Section 44D. Explanation (a) to Section 44D however specifies that "fees for technical services" as mentioned in Section 44D would have same meaning as in Explanation 2 to Clause (vii) of Section 9(1). said explanation as quoted above defines "fees for technical services" to mean consideration for rendering of any managerial, technical or consultancy services. However, later part of explanation excludes from consideration for purposes of expression i.e. "fees for technical services" any payment received for construction, assembly, mining or like project undertaken by recipient or consideration which would be chargeable under head "salaries". Fees for technical services, therefore, by virtue of aforesaid explanation will not include payments made in connection with mining project. 13. Income Tax Act does not define expressions "mines" or "minerals". said expressions are found defined and explained in Mines Act, 1952 and Oil Fields (Development and Regulation) Act 1948. While construing somewhat pari materia expressions appearing in Mines and Minerals (Development and Regulation) Act 1957 regard must be had to provisions of Entries 53 and 54 of List I and Entry 22 of List II of 7th Schedule to Constitution to understand exclusion of mineral oils from definition of minerals in Section 3(a) of 1957 Act. Regard must also be had to fact that mineral oils is separately defined in Section 3(b) of 1957 Act to include natural gas and petroleum in respect of which Parliament has exclusive jurisdiction under Entry 53 of List I of 7th Schedule and had enacted earlier legislation i.e. Oil Fields (Regulation and Development) Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 23 of 50 Signing Date:13.03.2020 15:56:04 Act, 1948. Reading Section 2(j) and 2(jj) of Mines Act, 1952 which define mines and minerals and provisions of Oil Fields (Regulation and Development) Act, 1948 specifically relating to prospecting and exploration of mineral oils, exhaustively referred to earlier, it is abundantly clear that drilling operations for purpose of production of petroleum would clearly amount to mining activity or mining operation. Viewed thus, it is proximity of works contemplated under agreement, executed with non-resident assessee or foreign company, with mining activity or mining operations that would be crucial for determination of question whether payments made under such agreement to non-resident assessee or foreign company is to be assessed under Section 44BB or Section 44D of Act. test of pith and substance of agreement commends to us as reasonable for acceptance. Equally important is fact that CBDT had accepted said test and had in fact issued circular as far back as 22.10.1990 to effect that mining operations and expressions "mining projects" or "like projects" occurring in Explanation 2 to Section 9(1) of 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 non-resident/foreign company would be chargeable to tax under provisions of Section 44BB and not Section 44D of Act. We do not see how any other view can be taken if works or services mentioned under particular agreement is directly associated or inextricably connected with prospecting, extraction or production of mineral oil. Keeping in mind above provision, we have looked into each of contracts involved in present group of cases and find that brief description of works covered under each of said contracts as culled out by appellants and placed before Court is correct. said details are set out below. S.No. Civil Appeal No. Work covered under contract Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 24 of 50 Signing Date:13.03.2020 15:56:04 1. 4321 Drilling of exploration wells and carrying out seismic surveys for exploratory drilling. 2. 740 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 3. 731 Drilling, furnishing personnel for manning, maintenance and operation of drilling rig and training of personnel. 4. 1722 Furnishing supervisory staff with expertise in operation and management of Drilling unit. 5. 729 Capping including subduing of well, fire fighting. 6. 738 Capping including subduing of well, fire fighting. 7. 1528 Analysis of data to prepare job design, procedure for execution and details regarding monitoring 8. 1532 Study for selection of enhanced Oil Recovery processes and conceptual design of Pilot Tests. 9. 1520 Engineering and technical support to ONGC in implementation of Cyclic Steam Stimulation in Heavy Oil Wells. 10. 2794 Assessment and processing of seismic data along with engineering and technical support in implementation of Cyclic Steam Stimulation. 11. 1524 Conducting reservoir stimulation studies in association with personnel of ONGC. 12. 1535 Laboratory testing under simulated reservoir conditions. 13. 1514 Consultancy for optimal exploitation of hydrocarbon resources. 14. 2797 Consultancy for all aspects of Coal Bed Methane. 15. 6174 Analysis of data of wells to prepare job design. 16. 1517 Geological study of 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. Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 25 of 50 Signing Date:13.03.2020 15:56:04 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. 23. 733 Repair of gas turbine, gas control system and inspection of gas turbine and generator. 24. 741 Repair and inspection of turbines. 25. 737 Repair, inspection and overhauling of turbines. 26. 736 Inspection, engine performance evaluation, instrument calibration and inspection of far turbines. 27 1522 Replacement of choke and kill consoles on drilling rigs. 28. 1521 Inspection of gas generators. 29. 1515 Inspection of rigs. 30. 2012 Inspection of generator. 31. 1240 Inspection of existing control system and deputing engineer to attend to any problem arising in machines. 32. 1529 Inspection of drilling rig and verification of reliability of control systems in drilling rig. 33. 2008 Expert advice on device to clean insides of pipeline. 34. 2795 Feasibility study of rig to assess its remaining useful life and to carry out structural alterations. 35. 925 Engineering analysis of rig. 36. 1519 Imparting training on cased hold production log evaluation and analysis. 37. 1533 Training on well control. 38. 1518 Training on implementation of Six Sigma concepts. 39. 1516 Training on implementation of Six Sigma concepts. 40. 6023 Training on Drilling project management. 41. 2796 Training in Safety Rating System and assistance in development and audit of Safety Management System. Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 26 of 50 Signing Date:13.03.2020 15:56:04 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. above facts would indicate that pith and substance of each of contracts/agreements is inextricably connected with prospecting, extraction or production of mineral oil. 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 payments made by ONGC and received by non- resident assessees or foreign companies under said contracts is more appropriately assessable under provisions of Section 44BB and not Section 44D of Act. On basis of said conclusion reached by us, we allow appeals under consideration by setting aside orders of High Court passed in each of cases before it and restoring view taken by learned Appellate Commissioner as affirmed by learned Tribunal." [Emphasis supplied] above noted judgment assumes significance, though on different aspect, which we shall elucidate and expound later in this judgment. 18. judgement of this Court in Director of Income Tax v. OHM Ltd. [2013] 352 ITR 406 (Del) also does not help Petitioner. In said case, assessee was engaged in business of providing geophysical services to oil and gas exploration industry; conducting electromagnetic, processing Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 27 of 50 Signing Date:13.03.2020 15:56:04 and interpretation of data, which so collected through survey was used in offshore oil industry. In said case, assessee claimed that oil and gas exploration activity was directly related and was part of exploration/prospecting activities for mineral oil and such services fell within ambit of Section 44BB. Authority for Advance Ruling followed its earlier decision and decided in favour of assessee. Revenue in challenge, contended that authority had erred in having failed to note that appropriate provision to be applied was Section 44DA read with Section 9 (1) (vii), Explanation 2 of Act. Court in said case agreed with view taken by Authority for Advance Rulings and referred to its earlier decisions of Director of Income Tax. v. Jindal Drilling & Industries Ltd. [2010] 320 ITR 104 (Delhi) and also to another order of Authority for Advance Ruling in case of Geofizyka Torun Sp.zo.o In Re (2010) 320 ITR 268 (AAR), and concluded that view taken by Authority was correct and held that Section 44DA is broader in scope as compared to Section 44BB. In that context, Court considered effect of second proviso to Sub Section (1) of Section 44DA inserted by Finance Act, 2010 and held as under: 11. We do not think that there is any error in view taken by AAR. Basically rule that specific provision excludes general provision has been applied. Section 44BB is special provision for computing profits and gains of non-resident in connection with business of providing services or facilities in connection with, or supplying plant and machinery on hire, used or to be used, in prospecting for, or extraction or production of mineral oils including petroleum and natural gas. Section 44DA is also provision which applies to non-residents only. It is, however, broader and more general in nature and provides for assessment of income of non-resident by way of Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 28 of 50 Signing Date:13.03.2020 15:56:04 royalty or fees for technical services, where such non-resident carries on business in India through permanent establishment situated therein or performs services from fixed place of profession situated in India and right, property or contract in respect of which royalties or fees for technical services are paid is effectively connected with permanent establishment or fixed place of profession. Such income would be computed and assessed under head "business" in accordance with provisions of Act, subject to condition that no deduction would be allowed in respect of any expenditure or allowance which is not wholly or exclusively incurred for business of such permanent establishment or fixed place of profession or in respect of amounts, if any, paid by permanent establishment to its head office or to any of its other offices. Under section 44BB one does not find any reference to permanent establishment in India. type of services contemplated by provision is more specific than what is contemplated by Section 44DA. Section 44BB refers specifically to "services or facilities in connection with, or supplying plant and machinery on hire, used or to be used in prospecting for, or extraction or production of mineral oils". Revenues earned by non-resident from rendering such specific services are covered by Section 44BB. It is well settled rule of interpretation that if special provision is made respecting certain matter, that matter is excluded from general provision under rule which is expressed by maxim "Generallia specialibus non derogant". It is again well-settled rule of construction that when, in enactment two provisions exist, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This was stated to be "rule of harmonious construction" by Supreme Court in Venkataramana Devaru v. State of Mysore, AIR 1958 SC 255. If as contended by Revenue, Section 44DA covers all types of services rendered by non- resident, that would reduce section 44BB to useless lumber or dead letter and such result would be opposed to very essence of rule of harmonious construction. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue Trivandrum, AIR 1964 SC 207 it was held that Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 29 of 50 Signing Date:13.03.2020 15:56:04 familiar approach in such cases is to find out which of two apparently conflicting provisions is more general and which is more specific and to construe more general one as to exclude more specific. 12. second proviso to sub-section (1) of Section 44DA inserted by Finance Act, 2010 w. e. f. 01.04.2011 makes position clear. Simultaneously reference to Section 44DA was inserted in proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that non- resident or foreign company should carry on business in India through permanent establishment situated therein and right, property or contract in respect of which royalty or fees for technical services is paid should be effectively connected with permanent establishment. Such requirement has not been spelt out in Section 44BB; moreover, flat rate of 10% of revenues received by non-resident for specific services rendered by it are deemed to be profits from business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by non-resident for business of permanent establishment in India and for expenditure towards reimbursement of actual expense by permanent establishment to its head office or to any of its other offices is allowed from revenues received by non-resident. Because of different modes or methods prescribed in two sections for computing profits, it apparently became necessary to clarify position by making necessary amendments. That perhaps is reason for inserting second proviso to sub- section (1) of Section 44DA and reference to section 44DA in proviso below sub-section (1) of Section 44BB. careful perusal of both provisos shows that they refer only to computation of profits under sections. If both sections have to be read harmoniously and in such manner that neither of them becomes useless lumber then only way in which provisos can be given effect to is to understand them as referring only to computation of profits, and to understand amendments as having been inserted only to clarify Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 30 of 50 Signing Date:13.03.2020 15:56:04 position. So understood, proviso to sub-section (1) of Section 44BB can only mean that flat rate of 10% of revenues cannot be deemed to be profits of non- resident where services are of type which do not fall under that section, but are more general in nature so as to fall under Section 44DA. Similarly, second proviso to sub- section (1) of Section 44DA can only be interpreted to mean that where services are general in nature and fall under sub-section read with Explanation 2 to Section 9(1)(vii) of Act, then assessee rendering such services as provided in Section 44BB cannot claim benefit of being assessed on basis that 10% of revenues will be deemed to be profits as provided in Section 44BB. In other words, amendment made by Finance Act, 2010 w. e. f. 01.04.2011 in both sections, cannot have effect of altering or effacing fundamental nature of both provisions or their respective spheres of operation or to take away separate identity of Section 44BB. We do not, therefore, see how these amendments can assist Revenue s contention in present case, put forward by learned Senior Standing Counsel. We, therefore, agree with AAR that in present case profits shall be computed in accordance with provisions of section 44BB of Act and not section 44DA. 13. In result writ petition fails and is dismissed with no order as to costs. [Emphasis Supplied] 19. Petitioner has strongly relied upon aforesaid observations to argue that this Court had explicated that second proviso does not efface applicability of Section 44BB, and notwithstanding second proviso to section 44DA, legal position remains unaffected. Before commenting on this contention, it is also necessary to take note of later decision of this court in PGS Exploration (Norway) AS v. Additional Director of Income Tax [2016] 383 ITR 178 (Delhi), where court also had occasion to Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 31 of 50 Signing Date:13.03.2020 15:56:04 consider aforesaid case of Director of Income Tax v. OHM Ltd (Supra). In said case, Court upheld contention advanced on behalf of 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 ambit of Section 44DA (1) of Act, would be taxable under Section 44BB (1). However, at same time, court considered effect of amendments introduced by Finance Act, 2010 and held as under: 27. contention advanced on behalf of Revenue that "fees for technical services" earned by foreign company in respect of contract which is connected with PE of such foreign company in India would be taxable under Section 44DA(1) of Act, irrespective of whether same is connected with extraction/production of mineral oils, cannot be accepted. By virtue of Finance Act, 2003, such income was excluded from ambit of Section 115A(1)(b) of Act w.e.f. 01.04.2004. Although, with effect from said date such income was taxable under Section 44DA(1) of Act but in certain cases where such income was earned by assessee by carrying on business of providing services in connection with prospecting for, or extraction or production of mineral oils, said income would also fall within express language of Section 44BB(1) of Act and in view of decision of this Court in OHM (supra), provisions of Section 44BB(1) of Act would be applied in preference to Section 44DA(1) of Act, in those cases. This conflict between Section 44BB(1) and 44DA(1) of Act was resolved by Finance Act, 2010 by including reference to Section 44DA in proviso to Section 44BB(1) of Act with effect from 01.04.2011 and simultaneously introducing second proviso to Section 44DA(1) which reads as under: Provided further that provisions of section 44BB shall not apply in respect of income referred to in this section. 28. Thus, after 01.04.2011, income falling within scope of Section 44DA(1) of Act would be excluded from scope of Section 44BB of Act. However during period Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 32 of 50 Signing Date:13.03.2020 15:56:04 from 01.04.2004 to 01.04.2011 tax on any income from fees for technical services falling within Section 44DA(1) of Act - which was excluded from ambit of Section 115A(1)(b) of Act but was not expressly excluded from scope of Section 44BB(1) of Act - would be computed under Section 44BB(1) of Act. Since Assessment Year 2008-09 falls within this period, income of assessee, to extent it falls within scope of section 44DA(1) of Act and stands excluded from section 115A(1)(b) of Act, would be computed in accordance with section 44BB(1) of Act. 29. Having stated above, we must clarify that income falling within Section 115A(1)(b) of Act which does not fall within four corners of Section 44DA(1) of Act would also not be taxable under Section 44BB(1) of Act, for reason that by virtue of proviso to Section 44BB(1) of Act, it is expressly excluded. Accordingly, if consideration received by Assessee for services rendered is found to be fees for technical services , AO would specifically have to determine (a) whether assessee had PE in India during relevant period; and (b) if so, whether contracts entered into by appellant with BG and RIL were effectively connected with Assessee s PE in India. It is only, if AO finds that said two conditions are satisfied, that income of assessee would be computed under Section 44BB(1) of Act. However, if such conditions are not satisfied then income tax payable by appellant would have to be computed in accordance with Section 115A(1)(b) of Act. 20. aforesaid observations, in our view, rightly interpret position in law. For that matter, Petitioner is misinterpreting earlier judgment of this Court in Director of Income Tax v. OHM (supra), to contend that Section 44BB being specific provision will override provisions of section 44DA of Act. Section 44BB of Act qualifies business activity whilst section 44DA applies to nature of income. Even in OHM Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 33 of 50 Signing Date:13.03.2020 15:56:04 Ltd. (supra), Court has taken view that is in concurrence with our opinion. In said judgment, Court in para 12 notes as under: "12. second proviso to sub-section (1) of Section 44DA inserted by Finance Act, 2010 w.e.f. 01.04.2011 makes position clear. Simultaneously reference to Section 44DA was inserted in proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that non-resident or foreign company should carry on business in India through permanent establishment situated therein and right, property or contract in respect of which royalty or fees for technical services is paid should be effectively connected with permanent establishment. Such requirement has not been spelt out in Section 44BB; moreover, flat rate of 10% of revenues received by non-resident for specific services rendered by it are deemed to be profits from business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by non- resident for business of permanent establishment in India and for expenditure towards reimbursement of actual expense by permanent establishment to its head office or to any of its other offices is allowed from revenues received by non-resident. Because of different modes or methods prescribed in two sections for computing profits, it apparently became necessary to clarify position by making necessary amendments. That perhaps is reason for inserting second proviso to sub-section (1) of Section 44DA and reference to section 44DA in proviso below sub-section (1) of Section 44BB. careful perusal of both provisos shows that they refer only to computation of profits under sections. If both sections have to be read harmoniously and in such manner that neither of them becomes useless lumber then only way in which provisos can be given effect to is to understand them as referring only to computation of profits, and to understand amendments as having been inserted only to clarify position. So understood, proviso to sub-section (1) of Section 44BB can only mean that flat Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 34 of 50 Signing Date:13.03.2020 15:56:04 rate of 10% of revenues cannot be deemed to be profits of non-resident where services are of type which do not fall under that section, but are more general in nature so as to fall under Section 44DA. Similarly, second proviso to sub-section (1) of Section 44DA can only be interpreted to mean that where services are general in nature and fall under sub-section read with Explanation 2 to Section 9(1)(vii) of Act, then assessee rendering such services as provided in Section 44BB cannot claim benefit of being assessed on basis that 10% of revenues will be deemed to be profits as provided in Section 44BB. In other words, amendment made by Finance Act, 2010 w.e.f. 01.04.2011 in both sections, cannot have effect of altering or effacing fundamental nature of both provisions or their respective spheres of operation or to take away separate identity of Section 44BB. We do not, therefore, see how these amendments can assist Revenue's contention in present case, put forward by learned Senior Standing Counsel. We, therefore, agree with AAR that in present case profits shall be computed in accordance with provisions of section 44BB of Act and not section 44DA." In above extracted portion, court has held that in case services are in nature of Royalty or FTS so as to fall under section 44DA, then assessee is rendering such services as provided in section 44BB, he cannot claim benefit of being assessed on basis that 10 percent of revenue will be deemed to be 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. upshot of above discussion is that after 01.04.2011, income falling within scope of Section 44DA (1) of Act would be excluded from scope of Section 44BB of Act. If income of non-resident Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 35 of 50 Signing Date:13.03.2020 15:56:04 is in nature of fees for technical services or royalty, it shall be taxable under provisions of either Section 44DA or Section 115A. definition of FTS and exception therein 22. There is yet another important factor that needs to be illuminated. It is to be borne in mind that as per explanation to Section 44DA, expression fees for technical services shall have same meaning as in Explanation 2 to clause (vii) of sub Section (1) of Section 9. This definition excludes mining or like projects from ambit of definition of fees for technical services . CBDT circular No. 1862, dated 22.10.1990, also clarifies that rendition of services like training and carrying out drilling operations for exploration/exploitation of oil and natural gas would also be covered within phrase mining or like projects and therefore shall fall outside ambit of technical services . relevant portion of said circular reads as under:- "1. expression "fees for technical services" has been defined in Explanation 2 to section 9(1)(vii) of Income-tax Act, 1961 as under : "Explanation 2 : For purpose of this clause, 'fees for technical services' means any consideration (including any lump sum consideration) for rendering of any managerial, technical or consultancy services (including provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining, or like project undertaken by recipient or consideration which would be income of recipient chargeable under head 'Salaries.' " 2. question whether prospecting for, or extraction or production of, mineral oil can be termed as 'mining' operations, was referred to Attorney General of India for his opinion. Attorney General has opined that such operations Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 36 of 50 Signing Date:13.03.2020 15:56:04 are mining operations and expressions 'mining project' or 'like project' occurring in Explanation 2 to section 9(1)(vii) of Income-tax Act would cover rendering of services like imparting of training and carrying out drilling operations for exploration or exploitation of oil and natural gas. 3. In view of above opinion, consideration for such services will not be treated as fees for technical services for purpose of Explanation 2 to section 9(1)(vii) of Income-tax Act, 1961. Payments for such services to foreign company, therefore, will be income chargeable to tax under provisions of section 44BB of Income-tax Act, 1961 and not under special provision for taxation of fees for technical services contained in section 115A, read with section 44D of Income-tax Act, 1961." This definition of FTS remains unchanged and circular No. 1862 dated 22.10.1990 is still in force. Thus, in nutshell, if services provided by assessee constitute services for mining or like project , consideration therefore it would be excluded from scope of fees for technical services . It is well settled that when there are two provisions in enactment which cannot be reconciled with each other, doctrine of harmonious construction should be applied and attempt should be so interpret provisions, if possible, giving effect to both. It is duty of courts to avoid "a head on clash" between two sections of same Act and, "whenever it is possible to do so, to construe provisions which appear to conflict so that they harmonise." It should not be lightly assumed that "Parliament had given with one hand what it took away with other". provisions of one section of statute cannot be used to defeat those of another "unless it is impossible to effect reconciliation between them". Despite amendments introduced in Section 44BB and 44DA, Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 37 of 50 Signing Date:13.03.2020 15:56:04 legislature has not amended definition of FTS and it remains unchanged. It has to be given meaning that emerges from Explanation 2 clause (vii) of sub Section (1) of Section 9. As result, if services are rendered for mining or like project , same would not qualify as FTS. Thus, if income of assessee is not covered under definition of FTS, it would get excluded from purview of Section 44DA. 23. With above clarity on legal position, we now proceed to examine nature of activities performed by assessee and income derived therefrom. This is necessary to answer crucial question in present case as to whether receipts from activities rendered by assessee fall under Section 44BB or fall within purview of Section 44DA after amendment introduced by Finance Act, 2010. CATEGORISATION OF INCOME OF PETITIONER: WHETHER ROYALTY OR FTS Observations of CIT w.r.t categorization of income of assessee 24. First and foremost, CIT in impugned order has not returned categorical finding as to whether income, or which part of Petitioner's income, falls under Royalty and FTS and that has constricted us to conclusively decide issue for reasons explained hereinafter. We are disappointed to note that CIT has not taken any definite stand. draft assessment order proposed under Section 143 (3) read with Section 143 (1) of Act, held that income of assessee has been considered in nature of Royalty/FTS. assessment was also finalized in above Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 38 of 50 Signing Date:13.03.2020 15:56:04 terms. Petitioner challenged assessment order by way of revision under Section 264 of Act where following ground was urged: Ground No. 1- Claim of section 44BB incorrectly denied. On facts and circumstances of case, Ld. AO erred in law and on facts of case in holding that income on account of receipts from provision of software enabled solutions to oil and gas industry along with providing annual maintenance services of software is in nature of fees for technical services/ royalty payments under section 9(1)(vii)/9(1)(vi) of Income Tax Act, 1961 (the Act ). 25. CIT considered contentions raised by Petitioner and rejected aforesaid ground inter alia holding as under: On comprehensive consideration of entire conspectus of factual matrix of case and extant legal position on issues involved, there is no merit in Ground Nos. 1 & 2 of assessee i.e. Claim of applicability of Section 4488 to assessee's receipts instead of Section 44DA adopted by Assessing Officer & estimating income @ 25% of Gross revenue/ receipts and is therefore rejected. natures of services rendered are not even wholly connected to drilling and prospecting. logic of ONGC decision does not apply in this case. In any case, 44DA adopted by Assessing Officer & estimating income @25% of Gross revenue/ receipts and is therefore rejected. natures of services rendered are not even wholly connected to drilling and prospecting. logic of ONGC decision does not apply in this case. In any case, provisions of section 44DA read with amended provisions of 9(1)(vi) and 9(1)(vii) clearly indicate that amount should be assessed under section 44DA as Royalty/FTS. Further, consistent stand of Department is that assessee's income from software licencing & its maintenance is taxable in terms Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 39 of 50 Signing Date:13.03.2020 15:56:04 of Section 44D/44DA and not under Section 44BB of IT. Act, 1961. 26. From aforesaid conclusion, it becomes evident that CIT has held that amount received by assessee should be assessed under Section 44DA as Royalty/FTS . CIT examined activities performed by assessee as listed out on assessee s website and concluded that assessee is providing software services for processing of raw seismic data. It is noted that assessee provides software to develop 2D/3D and graphs of seismic information available and also maintenance of such software. CIT has concluded that activities are carried at back end and can be done at any place. On this basis, CIT held that that there was no need for assessee s software at onsite/drilling site and thus since services provided by assessee were not directly involved in mining or like operation, same were NOT out of purview of FTS. This is erroneous approach. It was necessary for CIT to have given categorical finding as to nature of receipt in hands of assessee. In our considered opinion, CIT fell in error on this aspect. Although, CIT is correct in holding that mining or like project are out of purview of FTS, and consequently same would not fall within ambit of Section 44DA (1), however scope of technical services cannot be broadened by giving restrictive interpretation to expression mining or like project , appearing in Explanation 2 to clause (vii) of sub Section (1) of Section 9. CIT, perhaps in attempt to give meaning to combined effect of provisions of Section 44BB, Section 44DA and Section 115A has endeavoured to give such interpretation. However, such view is flawed, in as much as, scope of expression mining or like project has been Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 40 of 50 Signing Date:13.03.2020 15:56:04 confined only to situations where services are performed onsite i.e. at site of mining/drilling. We are unable to find any rationale in this reasoning. In impugned order, it has been noted that software supplied by Petitioner helps to ascertain drilling spot where there is maximum probability for finding oil. impugned order also records that 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 aforesaid services. It has been further noted in para 4.3 (a) that services of assessee prima facie appear to be covered by judgment of Apex Court in case of ONGC v. CIT (supra), as it is one of 44 work/activity identified by Court for applying Section 44BB instead of Section 44D . Reference here may be made to judgment of Supreme Court in case of ONGC (supra). In said case, Court applied doctrine of pith and substance in respect of each contract/agreement, to ascertain whether dominant purpose of agreements was prospecting, extraction or production of mineral oils. On that basis, Court held that payments made by ONGC and received by non-resident assesses or foreign companies under contracts is more appropriately assessible under provisions of Section 44BB and not Section 44D of Act. relevant portion of said judgment reads as under: "12. second proviso to sub-section (1) of Section 44DA inserted by Finance Act, 2010 w.e.f. 01.04.2011 makes position clear. Simultaneously reference to Section 44DA was inserted in proviso to sub-section (1) of section 44BB. It should be remembered that section 44DA also requires that non-resident or foreign company should carry on business Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 41 of 50 Signing Date:13.03.2020 15:56:04 in India through permanent establishment situated therein and right, property or contract in respect of which royalty or fees for technical services is paid should be effectively connected with permanent establishment. Such requirement has not been spelt out in Section 44BB; moreover, flat rate of 10% of revenues received by non-resident for specific services rendered by it are deemed to be profits from business chargeable to tax in India under Section 44BB, whereas under Section 44DA, deduction of expenditure or allowance wholly and exclusively incurred by non- resident for business of permanent establishment in India and for expenditure towards reimbursement of actual expense by permanent establishment to its head office or to any of its other offices is allowed from revenues received by non-resident. Because of different modes or methods prescribed in two sections for computing profits, it apparently became necessary to clarify position by making necessary amendments. That perhaps is reason for inserting second proviso to sub-section (1) of Section 44DA and reference to section 44DA in proviso below sub-section (1) of Section 44BB. careful perusal of both provisos shows that they refer only to computation of profits under sections. If both sections have to be read harmoniously and in such manner that neither of them becomes useless lumber then only way in which provisos can be given effect to is to understand them as referring only to computation of profits, and to understand amendments as having been inserted only to clarify position. So understood, proviso to sub-section (1) of Section 44BB can only mean that flat rate of 10% of revenues cannot be deemed to be profits of non-resident where services are of type which do not fall under that section, but are more general in nature so as to fall under Section 44DA. Similarly, second proviso to sub-section (1) of Section 44DA can only be interpreted to mean that where services are general in nature and fall under sub-section read with Explanation 2 to Section 9(1)(vii) of Act, then assessee rendering such services as provided in Section 44BB cannot claim benefit of being assessed on Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 42 of 50 Signing Date:13.03.2020 15:56:04 basis that 10% of revenues will be deemed to be profits as provided in Section 44BB. In other words, amendment made by Finance Act, 2010 w.e.f. 01.04.2011 in both sections, cannot have effect of altering or effacing fundamental nature of both provisions or their respective spheres of operation or to take away separate identity of Section 44BB. We do not, therefore, see how these amendments can assist Revenue's contention in present case, put forward by learned Senior Standing Counsel. We, therefore, agree with AAR that in present case profits shall be computed in accordance with provisions of section 44BB of Act and not section 44DA." 27. aforesaid observations of Supreme Court, where identical issue was involved, has not been appreciated in right perspective by CIT. If nature of services rendered have proximate nexus with extraction of production of mineral oils, it would be outside ambit of definition of FTS. In instant case, since nature of services rendered by Petitioner gets excluded from definition of FTS , in light of what is discussed above, next logical question that arises for consideration is whether Petitioner can claim benefit of Section 44BB. answer to this question is contingent on factual determination, as legal position has changed from April 01, 2011. It is now required to be considered whether receipts in hands of assessee qualify to be royalty or not? If answer to this question is in affirmative, then in that event, relevant provision would now be 44DA(1). purview of definition of Royalty 28. On this aspect, CIT has also made certain observations that assessee is not transferring ownership in software to purchaser Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 43 of 50 Signing Date:13.03.2020 15:56:04 and is only granting license to use same. It has been further held that under Clause (v) of Explanation 2 to Section 9 (1) (vi) of Act, transfer of all or any rights in respect of any copyright is Royalty . It has been held that if software continues to be owned by licensor, use thereof would amount to Royalty . relevant paragraphs (l) and (m) of impugned order, read as under:- "I) Under clause (v) of Explanation-2 to Section 9(1)(vi) of Act, transfer of all or any rights in respect of any copyright is royalty. term "in respect of' has been interpreted by SC/HC and given very wide meaning in following cases: (i) SC in Shahdara (Delhi) Saharanpur Light Railway Company Limited Ltd v. Upper Doab Sugar Mills Limited and another reported in AIR 1960, page 695; (ii) Bombay HC in Anusua Vithal and Others v J.H Mehata Additional Authroity under Payment of wages Act, Bombay and another reported in AIR 1960 (Bombay) page 201; (iii) Patna High Court in CIT Bihar and Orissa Patna vs Chunilal Rameshwar Lal reported in AIR 1968 (Patna) page 64. Relying on these judgments, Karnataka HC in case of Synopsis International Old Limited (212 Taxman 454) held that expression 'in respect of used in Explanation 2 denotes intention of Parliament to give broader meaning and wider connotation that covered all income from transfer of all or any of rights in respect of copyright. HC also observed that when meaning of words used are clear, unambiguous, merely because it is fiscal legislation, meaning cannot be narrowed down and it cannot be interpreted so as to give benefit to assessee only. Then it would be re- writing section, under guise of interpreting fiscal Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 44 of 50 Signing Date:13.03.2020 15:56:04 legislation, which is totally impermissible in law. When legislature has advisedly used words 'in respect of', intention is clear and manifest, said phrase being capable of broader meaning, same is used in section to bring within tax. net all incomes from transfer of all or any of rights in respect of copyright. Thus, it was held that license fee for use of software amount to transfer of all or any of rights in respect of copyright. m)When licence is granted to allow use of software by making copy of same and to store it in hard disk of designated computer and to take back up copy of software, it is clear that what is transferred is right to use software, exclusive right, which owner of copyright i.e., licensor owns and what is transferred is only right to use copy of software for internal business as per terms and conditions of agreement. It is also to be noted that what is supplied in such cases is copy of software of which respondent supplier continues to be owner (and not end user) and what is granted under licence is only right to copy software as per terms of agreement, which, but for licence would amount to infringement of copyright u/s. 52 of Copyright Act, 1957. software continues to be owned by licensor. On these facts, use of software will amount to royalty even under Indian Copyright Act, 1957 and also under LT. Act, 1961 in all 4 categories as given under: i. End user of distributors like IBM India Limited, Rational Software Corporation India Limited, Sunrays computers Private Limited, LG Soft India Pvt Ltd, M Tech India Private Limited, etc.; or 11. End user of Resident supplier of embedded software like Alcatel Lucent India, Microsoft Corpn. India; or in. End user of Non-resident supplier of embedded software like ZTE Corporation, Nokia Network OY, Ericsson; or Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 45 of 50 Signing Date:13.03.2020 15:56:04 IV. End user of -Nonresidcnt supplier of software - other than embedded software like Citrix Systems Asia Pacific Limited, Synopsis International Limited, etc." 29. Both sides have referred to several case laws in support of their contentions on plea pertaining to concept of income from royalty. Petitioner has impugned decision of CIT, contending that income from facilities/services of specialized software will not fall within purview of royalty under Section 9 (1)(vi) of Act. CIT has essentially relied upon judgment of Karnataka High Court in case of Commissioner of Income Tax and Anr. v. Synopsis International Old Ltd. (2012) 208 Taxmann.com 162 (Kar) to hold that expression in respect of used in Explanation 2 denotes intention of parliament to give broader meaning and wider connotation that covers all income from transfer of all or any of rights in respect of copyright. Petitioner on other hand has contended that this Court has specifically dissented from views expressed by Karnataka High Court. In this regard, reliance has been placed on 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 assessment order, assessing officer has taken note of contracts entered into by Petitioner with other parties. perusal of same indicates that such contracts are in nature of annual maintenance contract of upgradation, maintenance in support of software licenses; supply of software; AMC for software. nature of activity/scope of services Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 46 of 50 Signing Date:13.03.2020 15:56:04 under contract executed by Petitioner with various companies also indicates same position. relevant portion of order reads as under:- "The nature of activities/scope of work under contract with various companies is found to be as follows:- a. Under contracts/service orders With Calm India Ltd scope of work includes "AMC for Paradigm Software" provided by assesee alongwith AMC for renewal of Paradigm Software and supply of ''Paradigm Software license". b. Under contracts/service orders with ONGC Ltd. MAT/IMP/E""/2(769)/2009-10 scope of work includes providing service for up-gradation, maintenance and support of Paradigm Interpretation Software provided by assessee alongwith AMC for site specific Geolog Paradigm Software at ONGC site in some contracts c. Under ONGC contract 4050006697, assessee has supplied developed application software alongwith provision of SKUA software suite license. d. Under ONGC contract MATIIMPIE-I/I2(769)1200iJ-10 and MATIIMPIE-II/2(2772)1201Q-11 awarded by Oil and Natural Gas Corporation Limited for provision of annual maintenance contract for SKVA Suit of software under corporate licensing. e. Under ONGC contract 4050007265 assessee has supplied CRAM software alongwith provision of software license for GEOPIC. f. Purchase order number 048fl218157 with Reliance Industries Limited is for supply of perpetual software license and supply of software to be installed at Rellence facilities in India which comprise of Geolog Software. assessee also providing Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 47 of 50 Signing Date:13.03.2020 15:56:04 software maintenance services alongwith troubleshooting services and provision of license key. assessee is also providing software familiarization support and consultancy services by provision of personnel or providing training, AMC for software is also provided, g. Work order number 04813101650 With Reliance Industries Limited is for supply of perpetual software license and supply of software to be installed at Reliance facilities alongwith AMC for maintenance and support services of software in India alongwith supply of all enhancement and additions to Software. h. Service Order number 8300000785 with Gujarat State petroleum Corporation Ltd for provision of AMC of paradigm software. assessee is also providing installation and training with respect to software provided. i. Quotation no. US1O-D14Q1; Quotation no. US-10-014R2-JS- Q2; Quotation no. us..1()"014R2-JS-Q3 and Quotation no. US- 10-014R2-JS-Q4 & with Fugro Geoscience India Pvt Ltd for provision of software license access and support service agreement. j. Contract number OIUCCO/GPHY/GLOBAU275110-11 With Oil India Limited for provision of AMC and support services of paradigm software. assessee is also providing services of its engineers who are deputed to site of OIL in India for contract and maintenance services" 31. From above it manifests that contracts executed by assessee are composite contracts and there is no bifurcation with respect to nature of consideration relating to services rendered. assessee has not segregated its activities into supply of software and maintenance/support services. entire income derived under contracts was offered for Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 48 of 50 Signing Date:13.03.2020 15:56:04 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 Act. Whether services of updating software/renewal of license or warranty services or maintenance of software are inextricably and essentially linked to supply of software and are ancillary services is question of fact that would require determination after examining dominant purpose of such contracts. In our opinion, there is no factual clarity on this aspect. We do not find any such distinction/segregation that can be inferred with respect to receipts in hands of assessee under contracts executed by it, referred above. CIT being fact-finding body has failed to give reasoned order with respect to nature of income and its subsequent application. Directions 32. In view of afore-going discussion, we set aside impugned order and matter is remanded to file of Ld. CIT to assess Petitioner s income and tax payable thereon by first determining nature of income/receipts in hands of assessee in light of observations made in this judgment. CIT, would be required to give finding of fact on following aspect: Whether income from services provided by Assessee including supply of software as well as ancillary services such as maintenance and installation would be covered under definition of Royalty under Explanation 2 to section 9(vi) of Income Tax Act? Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 49 of 50 Signing Date:13.03.2020 15:56:04 If answer to above question is in affirmative, income would be taxable under section 44DA. On contrary, if answer is in negative, income of assessee would not be taxable under section 44DA but section 44BB [as held in ONGC (supra) as well as CBDT Circular No. 1862 dated 22.10.1990] since it is excluded from definition of Fees for Technical Services under Explanation 2 to section 9(vii) of Act, being covered under exception relating to mining and like activities provided in definition of FTS. Lastly, though this ground has not been raised by assessee, however, it is required to be examined whether assessee s case would be covered under India-Australia DTAA. Article 12(3) of said DTAA provides definition of Royalty. Petitioner is granted liberty to claim benefit under said DTAA before Ld. CIT if it wishes to do so. Besides, in event answer to question is in affirmative, assessee shall also be at liberty to assail such findings on merit, as we have refrained ourselves from determining whether income of royalty is excluded from definition under Act. 33. writ petition is allowed in above terms. SANJEEV NARULA, J VIPIN SANGHI, J MARCH 13, 2020/ss/nk/ks Signature Not Verified Digitally Signed By:SAPNA SETHI W.P.(C) 1370/2019 Page 50 of 50 Signing Date:13.03.2020 15:56:04 Paradigm Geophysical Pty. Ltd. v. Commissioner of Income-tax (International Taxation)-3, New Delhi