Section 44DA of the Income Tax Act
Income-tax Act, 2025: s.59
Section 44DA of the Income-tax Act, 1961 corresponds to section 59 (Computation of royalty and fee for technical services in hands of non-residents) of the Income-tax Act, 2025.
Read section 59 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 44DA is ONGC v. CIT (376 ITR 306), cited in 241 of the 168 judgments on BharatTax that turn on this section.
Leading authorities on Section 44DA
Income derived by a non-resident for services related to mineral oil operations, falling under the presumptive taxation regime of Section 44BB, cannot simultaneously be treated as fees for technical services under Section 9(1)(vii). The specific presumptive provisions override the general FTS definition, particularly when DTAA applies.
For computing presumptive income under Section 44BB, gross receipts do not include service tax reimbursements received from a client (like ONGC) if such amounts are not payments for services or plant/machinery directly used in the prospecting, extraction, or production of mineral oils.
For transfer pricing purposes, distinct international transactions, such as royalty payments and manufacturing, should be benchmarked separately rather than aggregated. The selection of comparables must be based on a thorough Functions, Assets, and Risks (FAR) analysis, and loss-making entities are not automatically excluded if they satisfy other comparability criteria.
The burden of proving the existence of a Permanent Establishment (PE) under a Double Taxation Avoidance Agreement (DTAA) rests squarely on the Income Tax Department.
Profits derived from manufacturing and sale activities should be apportioned based on well-established accountancy principles, attributing a greater portion to the manufacturing activity at the place of manufacture.
Income that is considered business income for tax purposes must be computed on a net basis, accounting for expenses incurred to earn that income, and cannot be taxed in India on a gross basis.
The term 'effectively connected' in Article 12(5) of the India-Japan DTAA means 'really connected', focusing on the substance of the connection rather than its form. This interpretation has been affirmed by the Delhi High Court and the Supreme Court.
The Assessing Officer must comply with the directions of the Dispute Resolution Panel (DRP) when passing final assessment orders, and failure to do so may warrant setting aside the assessment with a direction for compliance.
