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Petitioner opted to be taxed on presumptive basis under section 44BB(1) of the Act AO held that in accordance with terms of the contract, the nature of services provided by the Petitioner fell within the 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 i.e 25% of Gross Recipt as profit assessee, contended that the impugned order dated 01.11.2018 is fundamentally flawed, as the respondent has failed to appreciate the applicability of the decision of the Supreme Court incaseof Oil and Natural Gas Corporation Ltd (ONGC) v. CIT (2015) 376 ITR 306 SC, wherein it was held by the Supreme Court that the income falling within the ambit of Section 44D of the Act would be liable to be taxed under Section 44BB(1) of the Act, if it was in connection with extraction or production of mineral oils, since Section 44BB is a special provision. 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 the receipts in the hands of the assessee under the contracts executed by it, referred above. The CIT being a fact-finding body has failed to give a reasoned order with respect to the nature of income and its subsequent application.we set aside the impugned order and the matter is remanded to the file of the Ld. CIT to assess the Petitioner’s income

Shanti Prime Publication Pvt. Ltd.

Sec. 44BB and 44DA of Income Tax Act, 1961 – Business disallowance – Matter remanded to the file of CIT to assess the assessee’s income and tax payable by first determining the nature of the income/receipts in the hands of assessee.

Facts: Whether AO erred in holding that 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).

Held, that contracts executed by assessee are composite contracts and there is no bifurcation with respect to 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. 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/segregation that can be inferred with respect to the receipts in the hands of the assessee under the contracts executed by it, referred above. The CIT being a fact-finding body has failed to give a reasoned order with respect to the nature of income and its subsequent application, thus, the matter is remanded to the file of CIT to assess the assessee’s income and tax payable thereon by first determining the nature of the income/receipts in the hands of the assessee in light of the observations made in this judgment – PARADIGM GEOPHYSICAL PTY LTD. Vs. CIT [2020] 424 ITR 521 (DEL)