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35. It was further submitted that amount of Rs.92,60,349/-. If it cannot be considered even as expenses incurred in foreign currency in providing the technical services outside India. The objection against such consideration is that the assessee has not provided any technical services. The assessee has only rendered software development services or exported software to its customers outside India and has not rendered any technical services.

36. The ld Counsel relied on in case of Patni Telecom (P) Ltd. Vs ITO 120 ITO 105, the ITAT, Hyderabad bench has made the following distinction:

"26. Now we address the issue of characterization of these payments as Royalty so as to fall under Section 9(1)(vi) or Article 12 of India- Netherlands DTAA. We find that the assessee has purchased the Small World Software from Netherlands and bundled it with its own software and thus customized it and sold it to its own customers both in India and abroad. The assessee cannot meddle with the copies of the software in the process of its customization. We also observe that the assessee has to purchase the said software each time it wanted to sell the bundled software to its customers and if it had got any right to the copyright to the said software it would not have bought it every time when it wanted to sell. Further, perusing the books of the assessee at pages 170 to 175 of the paper book, we find that there are multiple purchases of software during the year and each purchase of single item on software is merely one thousand rupees and not huge amount. Hence, we are of the opinion that they are simply purchase cost of trading goods especially when the licence in respect of software is not obtained by the assessee and the perpetual licence is given directly to the end customer by the vendor company. Copies of the invoices raised by the Net Work Solutions on the assessee and at paper book 261 to 265 support the view of the assessee where the invoice mentioning name of the end customer supports our view. Hence, in our opinion, when there is no transfer of even the license to the assessee even through it is the ITA Nos.1450 to 1456 1780 395 InfoTech purchaser, it cannot be said that there is any royalty payment by the assessee to the vendor company. The amount of Rs. 52, 55, 881/- is simply the cost of imported trading goods and not royalty payment".

"26. Now we address the issue of characterization of these payments as Royalty so as to fall under Section 9(1)(vi) or Article 12 of India- Netherlands DTAA. We find that the assessee has purchased the Small World Software from Netherlands and bundled it with its own software and thus customized it and sold it to its own customers both in India and abroad. The assessee cannot meddle with the copies of the software in the process of its customization.

ITA Nos.1450 to 1456 1780 395 InfoTech We also observe that the assessee has to purchase the said software each time it wanted to sell the bundled software to its customers and if it had got any right to the copyright to the said software it would not have bought it every time when it wanted to sell. Further, perusing the books of the assessee at pages 170 to 175 of the paper book, we find that there are multiple purchases of software during the year and each purchase of single item on software is merely one thousand rupees and not huge amount. Hence, we are of the opinion that they are simply purchase cost of trading goods especially when the licence in respect of software is not obtained by the assessee and the perpetual licence is given directly to the end customer by the vendor company. Copies of the invoices raised by the Net Work Solutions on the assessee and at paper book 261 to 265 support the view of the assessee where the invoice mentioning name of the end customer supports our view. Hence, in our opinion, when there is no transfer of even the license to the assessee even through it is the purchaser, it cannot be said that there is any royalty payment by the assessee to the vendor company. The amount of Rs. 52, 55, 881/- is simply the cost of imported trading goods and not royalty payment".