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" Income By Way Of Royalty " [Section 9(1)(vi)]

[ Income Deemed To Accrue Or Arise In India]

 

Any royalty payable by

            (a)        the Government; or

            (b)        a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or

            (c)        a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India.
 

Important Points

(i)         This clause shall not apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in        respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government.

(ii)        This clause shall not apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the      granting of a license) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer- based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India.

(iii)       For the purposes of the point given at (i) above, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date; so, however, that, where the recipient of the income by way of royalty is a foreign company, the agreement shall not be deemed to have been made before that date unless, before the expiry of the time allowed under sub-section. (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for the assessment year commencing on the 1st day of April, 1977, or the assessment year in respect of which such income first becomes chargeable to tax under this Act, whichever assessment year is later, the company exercises an option by furnishing declaration in writing to the Assessing Officer (such option being final for that assessment year and for every subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st day of April, 1976.

(iv)       The term “royalty” means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for

  1. the transfer of all or any rights (including the granting of a license) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property
  2. the imparting of any information concerning the working of or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property
  3. the use of any patent, invention, model, design, secret formula or process or trade mark or similar property
  4. the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill
  5.  the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB
  6. the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or
  7. the rendering of any services in connection with the activities referred to in sub- clauses (i) to (v).
(v)        The term ‘computer software’ shall mean any computer programme recorded on disc, tape, perforated media, or other information storage device and includes any such programme or any customised electronic data.
 
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