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2009 (10) TMI 40 - AAR - Income TaxFee for technical services versus royalty – section 5(2), 9(1)(i) and article 12(5) of DTAAA with USA - business of supplying advance technology for the manufacture of radial tyres - a perpetual irrevocable right to use the know-how as well as to transfer the ownership in tread and side-wall designs and patterns required for the manufacture of radial tyres for a lump sum consideration of US $ 7,10,220 – held that - the sum of USD 343,425 representing consideration for the transfer of know-how and the grant of right to use the know-how can be subjected to tax in India, treating the same as deemed income by way of royalty - the amount of consideration related to the transfer of ownership in the tread and side wall designs/patterns amounting to USD 218,405 cannot be subjected to tax. However, the consideration for product development, totaling 148,390 USD stands on the same footing as transfer of know-how and is liable to be taxed under the Income-tax Act – withholding rate of tax is 10% plus surchase
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