“Section 9(1)(v)(c)”
The decision most relied on for Section 9(1)(v)(c) is CIT v. Samsung Electronics Ltd. (345 ITR 494), cited in 461 judgments on BharatTax.
Leading authorities on Section 9(1)(v)(c)
Payments by Indian residents to non-resident foreign software suppliers for software are considered royalty, constituting income deemed to accrue in India under section 9(1)(v), thereby requiring tax deduction at source under section 195.
Payments for the use of copyrighted software, without the transfer of any rights in the underlying copyright itself, do not constitute 'royalty' under the Income-tax Act or tax treaties. Such payments are often treated as business income, taxable only if a permanent establishment exists.
Revenue must demonstrate the existence of a Permanent Establishment (PE) of a foreign enterprise in India, including establishing that transactions underlying a Dependent Agent PE were not at arm's length. Income from the sale of goods is not taxable in India if title and risk in the goods pass outside India.
A penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income is not automatically leviable merely because a higher income is declared, even after a search or in a voluntarily revised return. The initial burden to prove concealment or inaccurate particulars lies with the Revenue.
Not all receipts constitute income chargeable to tax. An Assessing Officer cannot reject a prima facie reasonable explanation on mere probabilities or arbitrary grounds, but must disprove facts.
An expenditure is classified as either capital or revenue; the 'enduring benefit' test is a key criterion for this distinction, and income tax law does not generally recognize deferred revenue expenditure unless specifically provided.
Royalty involves a payment for the exclusive right to use something. Merely sharing information about a machine's design, even if tailored to a buyer's needs, does not constitute a transfer of an exclusive right to use, and therefore may not be considered royalty.
Once the arm's length principle has been satisfied under transfer pricing provisions, no further profit can be attributed to a person even if they have a permanent establishment in India. A reassessment notice based solely on the allegation of a permanent establishment is unsustainable if the arm's length price procedure has been followed.
