Section 144C(8) of the Income Tax Act
Income-tax Act, 2025: s.275
Section 144C(8) falls under section 144C of the Income-tax Act, 1961, which corresponds to section 275 (Reference to Dispute Resolution Panel) of the Income-tax Act, 2025.
Read section 275 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 144C(8) is Verizon Communications Singapore Pte. Ltd. v. ITO (International Taxation) (39 Taxmann.com 70), cited in 43 of the 45 judgments on BharatTax that turn on this section.
Leading authorities on Section 144C(8)
The case establishes that in the modern virtual world, an entity's virtual presence, rather than just physical presence, is key to determining its operational extent, especially when equipment is placed at customer premises. This principle guides the characterization of payments to non-residents, often as royalty, attracting withholding tax under Section 195, considering statutory explanations for deemed accrual of income.
The 'use or right to use' of an asset, which is a condition for royalty income, is satisfied when possession and control are given to the hirer for their beneficial use, even if the owner retains ultimate ownership.
The Assessing Officer or Transfer Pricing Officer must consider appropriate brand royalty and technical know-how royalty rates based on benchmarking studies when computing the value of AMP transactions, especially when an assessee has not paid royalty to its foreign Associated Enterprise for the use of brands and other intangibles.
The Non-Discrimination clause in tax treaties, such as the India-US and India-Japan treaties, prevents disallowance of expenses paid to associated enterprises where the clause is pari materia, even if the Assessing Officer initially disallowed a portion.
