Case Law Details
Paradigm Geophysical Pty Ltd. Vs CIT (Delhi High Court)
After 01.04.2011, income falling within the scope of Section 44DA (1) of the Act would be excluded from the scope of Section 44BB of the If the income of a non-resident is in the nature of fees for technical services or royalty, it shall be taxable under the provisions of either Section 44DA or Section 115A.
This definition of FTS remains unchanged and circular No. 1862 dated 22.10.1990 is still in force. Thus, in a nutshell, if the services provided by the assessee constitute services for “mining or like project”, the consideration therefore it would be excluded from the scope of “fees for technical services”. It is well settled that when there are two provisions in an enactment which cannot be reconciled with each other, the doctrine of harmonious construction should be applied and attempt should be so interpret the provisions, if possible, giving effect to both. It is the duty of the courts to avoid “a head on clash” between two sections of the 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 the other“. The provisions of one section of a statute cannot be used to defeat those of another “unless it is impossible to effect reconciliation between them“. Despite the amendments introduced in Section 44BB and 44DA, the legislature has not amended the definition of FTS and it remains unchanged. It has to be given the meaning that emerges from Explanation 2 clause (vii) of sub Section (1) of Section 9. As a result, if the services are rendered for “mining or like project”, the same would not qualify as FTS. Thus, if the income of an assessee is not covered under the definition of FTS, it would get excluded from the purview of Section 44DA.
If the nature of services rendered have a proximate nexus with the extraction of production of mineral oils, it would be outside the ambit of the definition of FTS. In the instant case, since the nature of services rendered by the Petitioner gets excluded from the definition of “FTS”, in light of what is discussed above, the next logical question that arises for consideration is whether the Petitioner can claim the benefit of Section 44BB. The answer to this question is contingent on factual determination, as the legal position has changed from April 01, 2011. It is now required to be considered whether the receipts in the hands of the assessee qualify to be “royalty” or not? If the answer to this question is in the affirmative, then in that event, the relevant provision would now be 44DA(1).
In the assessment order, the assessing officer has taken note of the contracts entered into by the Petitioner with other parties. A perusal of the same indicates that such contracts are in the nature of annual maintenance contract of upgradation, maintenance in support of software licenses; supply of software; AMC for The nature of activity/scope of services under the contract executed by the Petitioner with various companies also indicates the same position.
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