HP Agrawal: Is royalty paid by a non-resident to another taxable in India?

The issue for consideration is as to whether the royalty paid by the foreign manufacturers on manufacturing of the goods outside India could also be taxed in India if such goods are sold in India. In terms of section 9(1)(vi)(c), royalty payable by a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India, is taxable in India because such royalty is treated as ‘deemed’ to accrue or arise in India in the hands of recipient of royalty.In an interesting recent case (ITA - 3700/D/2009), a US Company granted a non-exclusive and non-transferable worldwide license of its patents developed on CDMA technology to wireless Original Equipment Manufacturers (‘the OEMs’) outside India to make, import, use and sell CDMA handsets and wireless equipment (the ‘Products’) anywhere in the world. In consideration for the grant of licence, the US Company charged a royalty from OEMs.

Source : Business Standard