Royalty excludes sale of drawings and designs

By Sumes Dewan and Shradha Puri,KR Chawla & Co
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The Income Tax Appellate Tribunal (ITAT), in a recent judgment (Parsons Brinckerhoff India (P) Ltd v Assistant Director of Income-tax, International Taxation, Circle (2) (1), Delhi 24 SOT 341 Delhi) held that income deemed to accrue or arise in India from proceeds of an outright sale of drawings and designs could not be treated as royalty.

In this case, an Indian company entered into a contract with PB Asia (PBAT).

Sumes Dewan,Partner,KR Chawla & Co
Sumes Dewan
Partner
KR Chawla & Co

The company had been awarded a contract for rendering such services to Larsen & Toubro in connection with the Second Vivekananda Bridge Tollway (SVBT) project. PBAT had to supply detailed design services for the project and receive consideration from the company.

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Sumes Dewan is a partner and Shradha Puri is a senior associate at KR Chawla & Co Advocates & Legal Consultants. The firm is headquartered in New Delhi and has offices in Chennai, Bangalore and San Francisco, as well as a representative office in Singapore.

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