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2013 (9) TMI 610 - AT - Income TaxRoyalty u/s 9(1(vi) - non resident assessee - lump sum payment - Whether the payment received is to be considered as capital gain or royalty income for the transfer of technology, know-how and trademark etc. - Taxability of the amounts received by the assessee in terms of the agreement for transfer of technology, know how and trademark to German Remedies/Cadila Health care Ltd. - Held that:- The agreement had originally been entered into with German Remedies on 17.2.2003 but later on merger of German Remedies with Cadila Healthcare Ltd., a fresh agreement on the same terms and conditions was entered into with Cadila Healthcare Ltd. on 2.12.2003 - True nature of transaction cannot be determined only on the basis of the words "transfer", "assignor", "assignee" used in the agreement but on careful consideration of the real nature of transaction after taking into account the effect of all the clauses in the agreement. Clauses of the agreement shows that the assessee has not been given ownership right over the technical information and trademark and there are limitations placed on exercise of such rights by the assignee – Assignee cannot use or utilize the technical information or the trademark for sale of products either directly or indirectly outside the territory without prior approval of the assessee, which would be at its absolute discretion - Further the assignee cannot license or assign or transfer the technical information and trademark to any person other than the Cadila affiliates - There are also several restrictions on the assignee in the matter of use of technology, know how and trademark which makes it quite clear that the assignee has not been given ownership rights and only right to use - Such payment for use of technical information and know how has to be considered as royalty both under the provisions of Income Tax Act and under the provisions of DTAA between India and Germany even if the payment is lump sump and not recurring - The royalty is taxable in India under section 9(1)(vi) as well as under the provisions of DTAA – Decided against the Assessee.
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